Old Mutual Wealth is “simplifying” its charging structure, including removing the annual pension drawdown fee which the company claims will benefit around 8,000 customers, with effect from 1 January 2015.
The company, which recently rebranded from Skandia, said it is scrapping its drawdown fee which is currently set at £58.20 per annum, in the wake of pension changes announced in the Budget earlier this year and due to come into effect in April 2015.
The firm said around 8,000 Old Mutual Wealth customers currently in drawdown will benefit from the removal of the charge.
Speaking to FTAdviser, Phil Ralli, head of Aviva’s platform proposition, previously predicted “downward pressure on drawdown costs”, after it scrapped all charges related to drawdown. He said following the Budget, drawdown will increasingly become a “core function”.
Old Mutual added it also set on 1 January 2015 to scrap the current minimum charge of its platform. At present, anyone with investments of less than £20,000 on Old Mutual Wealth’s unbundled charging basis pays a minimum charge of £8.33 per month.
The firm said that the removal of the flat minimum monetary charge creates better value for smaller investments, ensuring the charging structure can be easily understood by both financial advisers and customers.
Old Mutual Wealth said the changes are designed to make it better value for smaller investments and for customers looking to take advantage of the new pension withdrawal rules.
Tom Hawkins, head of financial solutions at Old Mutual Wealth said: “By removing our drawdown fee and the current minimum charge on the platform our customers will only pay one fee.
“Additional layers of charges, such as those for switching, drawdown or exit charges are hazardous for customers as they can never fully predict future behaviour and therefore how much they will pay in the longer term.
“Following the Budget announcements, we believe drawdown charges should become obsolete.
“People will be given greater freedom as to how they access their pension savings and they will not expect to be charged extra for those freedoms. For providers, the new rules will remove much of the administration associated with income drawdown making an extra charge unnecessary.
“We are making this option more affordable for people at a time when it is becoming more attractive.”
ruth.gillbe@ft.com
