Income drawdown can be a viable alternative to buying an annuity at-retirement, and allows a retiree to “keep all their options open”, according to Graeme Mitchell.
The managing director of Scottish Borders-based advisory firm Lowland Financial Services, says if a client understands the risks involved they can take a regular, flexible income into retirement, which is particularly attractive for those with larger pension funds and a range of alternative income sources.
But with a range of drawdown products available, from traditional insurers, to Sipp providers and both advised and non-advised investment providers, which products does Mr Mitchell recommened?
Scottish Widows Retirement Account
first up, Mr Mitchell says the Scottish Widows Retirement Account was a popular choice which he had used since launch.
Scottish Widows combined retirement planning and income into a single plan in 2008, in a move which Mr Mitchell calls “ahead of its time”, offering a “transparent and unbundled charging structure” which was the forerunner of the RDR.
Iain McGowan, the current head of savings and investments at Scottish Widows, says at the time that the addition of a drawdown capability to the established retirement account provided a “complete retirement planning solution”, making an adviser’s management of their client’s policies more straightforward, and all through one integrated platform.
The product offers clients a range of funds from ready-made investment portfolios to specialist funds, with seven risk-rated fund-of-funds and the facility to switch funds on a lifestyling basis free of charge.
Adviser charging is facilitated on a monthly or yearly basis, with drawdown available between the ages of 55 and 73. Minimum initial fund size is £50,000 and product annual management charges range from 0.10 per cent to 0.70 per cent, depending on the size of the investment.
Fund AMCs range from 0.10 per cent to 1.72 per cent. Service charges reduce gradually from 0.65 per cent for investments between £10,000 and £20,000, to 0.10 per cent for investments of £2m and higher, and the account has access to 135 funds.
Mr Mitchell said: “This product has stood the test of time, and the cost reduces as the value of funds increase. It offers cheap in-house funds for a governed investment approach, and with no drawdown charge, unlimited free switching and no hidden costs, it can offer a no-frills option and is a good place to start.
“Funds are linked to Fidelity FundsNetwork portfolios, offering a broad range of active funds, but it can also offer a more bespoke approach, and can access discretionary fund managers.
“It’s a good all-rounder, which I have used quite a bit, however Scottish Widows could do with a refresh in terms of online functionality.
“You currently can’t search for a fund by name on the platform, which is a bit basic, and the lack of model portfolios is disappointing, as this is a function which I’m increasingly using, but overall, this has been the product to beat.”