Aviva has confirmed to FTAdviser it is scrapping the £100 administration charge on its drawdown product, in the wake of radical changes to pensions tax rules that are expected to push more to drawdown at the expense of annuities.
The life insurer will tomorrow (29 July) announce to advisers that it is removing the charge with effect from 1 September. It will apply to both new and existing clients, and the firm is allowing advisers to be able to quote on the new basis from 1 August onwards.
A month lapse between advisers being able to quote and the new charges coming into effect will allow for advisers to have time to talk about the charge with clients, the firm said.
The change comes in wake of changes that will allow pensioners to take as much out of their pension pot as they like without facing limits, in a serious of reforms confirmed last week that most believe will favour more flexible products such as drawdown.
It also follows criticism of drawdown charges, which a report by the The Lang Cat for Fundsnetwork found vary substantially across providers and can be as much as several thousand pounds for clients with the largest pots.
The study revealed a range of one-off and annual fees that some providers charge but others do not, and that can mean clients pay up to more than £4,000.
In particular, it highlighted disparity in one-off event charges, such as set up administration fees which range from zero to £240, additional crystallisation charges that could go up to £100, and withdrawal charges that could be as high as £60.
Phil Ralli, head of platform proposition at Aviva, said: “We think what was announced in the Budget will increase the role income drawdown plays in the market.
“We are certainly expecting that other plans will look for a range of drawdown options they’ve got and we also think other platforms will look at the nature of their charges.”
Mr Ralli added that the reason for the change was because the firm had “seen an increase in drawdown as a result of the Budget announcement”, as well as the firm launching flexible drawdown earlier this year, which took them to a position “where we have all options available on all platforms.”
