Drawdown advice may prove unsuitable: expert

David Trenner, technical director for the retirement specialist, said the increase in tax on drawdown death benefits from 35 per cent to 55 per cent on 6 May could contradict some advisers' original reasons for selecting drawdown for their clients.

He said: "We know that many clients valued the death benefit and their advisers used it as a justification to go down the drawdown route. The recent change to the tax rules could render the original justification unsuitable. Advisers should ensure that clients are aware of the recent changes."

In addition to higher tax penalties, drawdown users also face significant cuts to their income because of the the recent reduction of the maximum income they can take from 120 per cent of the old Government Actuary's Department table to 100 per cent the new, reduced GAD table.

Andrew Pennie, marketing director for Intelligent Pensions, said: "A large percentage of the UK drawdown book is currently in full drawdown with the investor taking maximum income.

"They will not only be hit by the reduction in GAD but will also be hit by the fall in gilt yields and the likelihood that their fund has been eroded due to taking maximum withdrawals. Many clients would benefit from a reality check on where they are going with their retirement pots."

Matthew Allen, director for London-based Mulberry IFA, said: "Some people who are taking maximums GAD will have a shock because they may not have been reviewed in years and will be hit by both the reduction in GAD figures and also an erosion of their pensions."