Skandia has reported an increase of more than 200 per cent in flexible drawdown business on its platform pension, the Collective Retirement Account, over the past 12 months.
Now over 1,000 flexible drawdown cases are written on the CRA.
While annuities are the most popular way of providing income from pension savings, Skandia pointed out that they do not automatically take inflation into account unless clients are prepared to accept a lower income.
According to the firm, assuming inflation stays at 2.5 per cent, men who live to 85 will see their annuity reduce in value by 40 per cent in real terms.
Adrian Walker, pensions expert at Skandia, said: “It is clear that financial advisers are increasingly taking a broader view of their clients retirement needs, and as such are welcoming the more flexible solutions that are available.
“One of the reasons for our increased activity may be the higher number of individuals reaching state pension age. Some of these people will be receiving the most beneficial levels of State Pension provision, potentially coupled with final salary company pensions. This combination will provide an underpin of secure income that will make them eligible for flexible drawdown.
“We are encouraged to see more people looking at flexible drawdown to provide a suitable income in retirement from their money purchase pension savings and see this is an important first step in the industry moving away from viewing annuities as the ‘default’ solution.”
