Discount broker Hargreaves Lansdown has launched a low-cost drawdown option to appeal to investors who are not able to wait until full pension access is granted next April to generate an income, which will not require them to “pay for a financial adviser”.
Pension investors aged over 55 can access the ‘Retirement Bridge’ plan at a cost of just £75 plus Vat. It will allow them to draw the 25 per cent tax-free cash, and initially take an income of between 7.20 per cent and 12.45 per cent of the fund value.
Hargreaves said there will be no charge for taking a regular income and no charge for holding cash, “meaning investors can protect the value of their fund until April at no extra charge”. At this point new pension freedoms come into force and those in the plan can take funds as they wish.
The firm said: “Most pension providers have not yet developed simple, low-cost drawdown solutions which can be accessed without having to pay for a financial adviser.”
Tom McPhail, head of pensions research at Hargreaves, added: “Some investors are happy to wait until next year but for those who need to draw cash or an income now, it is essential they are offered an alternative to a conventional annuity - preferably without hitting them with thousands of pounds in set up fees or advice costs at the same time.”
Some have previously raised concerns over individuals being given flexible access to their pension without advice, saying this runs the risk of more people depleting their pension and falling back on the state.
Advisers have even cited what they see as an existing bias on the part of the regulator in favour of annuities, on the basis that drawdown is unlikely to be a suitable option for all but a minority of wealthier savers.
The Retirement Bridge has been launched in the wake of the Budget announcement, following research by Hargreaves that the firm said reveals 58 per cent of prospective annuity purchasers have delayed decision making specifically as a result of the changes.
The research also showed almost 80 per cent have no specific plan at the moment, but are awaiting further details to be announced following the Budget.
Insurance company annuity sales have collapsed in the wake of the Budget, with most reporting sales down around 50 per cent. Some have predicted sales of individual annuities could fall longer term by as much as 90 per cent.
The firm added that for those investors who need to draw on their pension but who do not want to commit to buying an annuity right now, “there are very limited options available”.
