The senior technical consultant for Sipp and Ssas provider Hornbuckle Mitchell said providers should receive direct instructions from clients before increasing drawdown rates to 120 per cent.
She said: “Providers don’t know a client’s individual circumstances. Many individuals may have requested the maximum at that particular time, not expecting to receive the extra 20 per cent if it is to be taxed at a higher rate.”
Ray Chinn, head of pensions and investments at LV=, echoed these comments, when he said: “We have written to clients to let them know the GAD limit has increased, it’s important to seek advice as clients need to be aware of their tax position.”
Last week, David Trenner, technical director of Glasgow-based advisory firm Intelligent Pensions, claimed that providers must inform clients that their drawdown levels will automatically increase to 120 per cent.
In response, a spokesman for Standard Life said it was following specific customer income payment instructions as they had either opted for a fixed income, or a percentage of the maximum GAD limit, which will go up or down automatically with any change in GAD limits.
She said: “Where customers have told us to pay a percentage of the maximum income allowed, they will automatically get a higher income when the limit goes up from the start of their next income year.
“This is the same approach we take for any income recalculation for these customers.
“The vast majority of these instructions were given before April 2011, when the maximum allowed was 120 per cent.”
Adviser view
Steve Clark, director of Leicestershire-based advisory firm 44 Financial, said: “Drawdown has to be part of the advice process, and I think this is part of a trend where providers are trying to marginalise advisers.”