Old Mutual Wealth is set to simplify its charging structure by removing the annual pension drawdown fee and scrapping the current minimum charge on its platform, its head of financial solutions has said.
Tom Hawkins said the changes will take effect from 1 January 2015, and are designed to make its offerings better value for smaller investments and for customers looking to take advantage of the new pension withdrawal rules.
The decision by Old Mutual Wealth to remove its drawdown fee, currently set at £58.20 a year, followed the government’s Budget pension changes which come into effect in April 2015.
The new rules giving greater flexibility to how people get their retirement savings, may result in an increasing number of people entering drawdown instead of purchasing an annuity. Some 8,000 Old Mutual Wealth customers in drawdown will benefit from the removal of the charge.
Currently, anyone with investments of less than £20,000 on Old Mutual Wealth’s unbundled charging basis pays a minimum charge of £8.33 a month.
The removal of the flat minimum monetary charge creates better value for smaller investments and ensures the charging structure can be easily understood by both financial advisers and customers.
Mr Hawkins added: “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.”
Adviser view:
Neil Shillito, company director, at SG Wealth Management in Norwich, said: “It’s wrong to enter a race to the bottom. The problem is, all you will end up with is poorer quality.”
