Old Mutual Wealth is to launch a new flexi-access drawdown facility and ad hoc lump sum access via its Collective Retirement Account (CRA) in time for the new pension freedoms coming into force on 6 April, the company has confirmed.
The new options will be available to all existing and new customers and for all nominated beneficiaries in the event of a customer’s death.
It explained that people will be able to set up monthly income payments similar to a salary or take ad hoc withdrawals from uncrystallised funds at intervals that suit them. The tax-free cash element can either be taken in one go up front, or taken in installments as part of each ad hoc withdrawal.
This accords with the flexi-access and uncrystallised fund ad hoc lump sum options written into the Treasury’s rules, which allow either for an ultra-flexible drawdown option or lump sums which do not crystallise the pot and include a tax-free portion in each payment.
The latter can be facilitated under drawdown rules in the same way as phased drawdown works currently: a portion of the pot is crystallised in each case and then taken in full, with 25 per cent tax free and the remainder taxed as income.
Customers currently in capped drawdown will be able to convert their account to flexi-access at any time from April 6, or they can continue to use capped drawdown in order to maintain their current £40,000 annual contribution allowance.
There will be no specific charge to use any of the new flexi-access drawdown facilities, according to OM Wealth. Instead customers will only pay the normal platform charge and underlying fund charges of their investment portfolio.
Adrian Walker, the group’s retirement planning manager, said he believes people should be trusted with their pension savings.
“However this isn’t about products or even the new rules, it is about people and their money. Each individual needs to fully understand their personal circumstances, looking at all of their savings, not just their pension before deciding on their future income planning.”
He added that while the guidance guarantee is “fine”, it is no substitute for professional financial advice.
“With more flexible withdrawal options and new tax effective ways in which people can leave pension savings to nominated beneficiaries when they die, it can be argued for many that their money purchase pension savings should remain invested for as long as possible.
“There is a danger that people get carried away with the new freedoms if they don’t seek advice and as a result suffer unexpected tax bills or loss of future benefits. The government’s Pension Wise guidance service should make people aware of the options and this in turn will lead to higher demand for financial advice.”
Earlier this week, Suffolk Life became the latest provider to confirm its proposition ahead of ‘freedom day’, following in the footsteps of Axa Wealth, Zurich, Sanlam and Prudential.
peter.walker@ft.com