Platforms should not be charging advisers and their clients for facilitating “core functions” as these could be perceived by the regulator as “unreasonable barriers” to consumers’ choice, Aviva has said.
In July, FTAdviser revealed that Aviva had removed its administration charge for drawdown due to the radical changes announced in the Budget. The firm said it has also removed all charges related to drawdown, including exit, transfers or chrystallisation fees.
Speaking to FTAdviser, Phil Ralli, head of Aviva’s platform proposition, said: “Our view is that the impact of the Budget this year means that drawdown is likely to be used more widely by advisers. Our experience is that advisers and clients really don’t like paying for what regard as basic transactions, such as switching platforms.
“Advisers are reticent to use platforms that have basic transaction charges. Moving into drawdown is more complex than a basic switch [but] drawdown will increasingly become a core function for customers and I think... platforms will become better at at administering this.”
He added there has been a “lot of interest” in platform pricing followed by the Budget, and there will be “downward pressure on drawdown costs”.
Mr Ralli added: “According to recent Platforum figures, 80 per cent of advisers’ new business is going to platforms. The FCA also said they don’t want there to be unreasonable barriers to consumers’ choice.
“Charges like transferring off will become less used by platforms.”
He added that looking across the market, it is clear that charges are already generally coming down, citing that Fidelity has also removed its drawdown charges “and others look like they may follow suit”.
Mr Ralli said: “Yes decumulation is more work for providers, but well-managed decumulation keeps money on their books longer, and we earn from our platform charge, so that will do for us.
“If you’re managing Isa money along with pension money on the platform – and if you’re not you should be – then this also helps with holistic decumulation advice. Take the money from where you want to without cost implications.”
Mr Ralli says it seems “inescapable that the correct charge for letting someone have their money back – albeit within the taxman’s rules – has to be zero”. However, he highlighted that different platforms have got different areas of expertise.
Earlier this year a study by Lang Cat for Fundsnetwork found a wide disparity in drawdown charges, with a range of one-off and annual fees that some providers charge but others do not meaning clients can pay up to more than £4,000.
The research highlighted disparity in one-off event charges, such as set up 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.
