Flexible drawdown is still not offered by seven major providers, despite almost all small providers facilitating access, according to the latest Money Management income drawdown survey.
The drawdown strategy – which allows clients to vary their level of their pension income, or take it all in one go, if they can prove they have a secure income of at least £20,000 from other sources – has been allowed by legislation since 6 April 2011. A flurry of interest was initially expected, but some large income drawdown providers have remained reticent to offer it as a choice.
According to the survey, the list of providers not offering it includes:
• Aegon (Retirement Control product)
• Axa Wealth Elevate
• Legal & General
• Scottish Life
• Scottish Widows
By contrast, the remaining 59 providers in the survey offer flexible drawdown as well as capped. This includes relatively small providers such as Attivo and Liberty Sipp, which have £24m and £18m in assets under management respectively. The only other provider not to offer a flexible scheme is Avalon
It could be argued that cost is a barrier to offering flexible drawdown. Richard Bean, Ssas and Sipp development consultant at Chase de Vere IFA, said its higher charges for setting up flexible drawdown reflected the additional complexity and increased risk to the firm as trustees and administrators.
However. the argument does not stand up for companies with hundreds of millions of drawdown assets under management.
The issue instead appears to be demand and, indeed, many customers opting for drawdown will not qualify for flexible drawdown. According to data from HMRC for 2011-12, only 1,708 individuals took income this way.
Aviva said it constantly reviewed demand for products and may look to introduce flexible drawdown if appropriate. Colm McLaughlin, senior market analyst at Scottish Widows, said, “We’re waiting to see the level of demand in the market for this type of proposition and will consider it as part of our future development plans.”