Data reveal 160% rise in adviser drawdown enquiries

Pensions technology provider Selectapension has published data pointing to a substantial increase in interest in drawdown from advisers on behalf of clients, with those using its income drawdown calculator tool more than doubling over the past two years.

According to the data, there has been a 160 per cent increase in advisers using the drawdown in the past two years, with an increase of 24 per cent recorded over the past 12 months.

Drawdown rates are based on Government Actuary Department rates, which have been at rock bottom levels in recent years as the price of government bonds that underpin this rate has plummeted.

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The Government Actuary’s Department rate increased from 3 per cent in September to 3.25 per cent in October, but fell back to 3 per cent in November. In June 2002 the rate was 5.25 per cent.

Selectapension said the change in March 2013’s Gad rate to 2.75 per cent sparked the biggest single month of drawdown activity by advisers over the past two years, as this was the highest it had been in almost a year since April 2012.

Further changes throughout 2013 have not created distinct peaks in adviser interest. Instead the technology provider has seen a steady rise in drawdown activity from the adviser community.

Selectapension said this trend could be attributed to the poor values associated with annuity purchase. Increasing life expectancy and low gilt yields has meant annuities are at extremely low levels but have started picking up.

Data published by Axa Life Europe in 2013 showed that annuity rates had fallen by close to 30 per cent over the four years during which the Bank of England’s quantitative easing programme has been in operation.

Last year, LV= said that advisers should be looking at income drawdown after “going cold” on the product in recent years.

Ray Chinn, head of pensions and investment at the firm, said the increase in the Gad rate is good news for both financial advisers and their clients and urged advisers to take another look at income drawdown.

Andy McCabe, managing director at Selectapension, said: “We have reported numerous changes in adviser behaviour this year. The adviser community has had a lot to contend with, including the impact of RDR, low annuity levels as well as clients becoming more tuned in to their finances.”