Personal Pension  

Drawdown providers quick off mark post-Budget

A week after chancellor George Osborne announced that “nobody will be forced to buy an annuity” in the 2014 Budget, Skandia, part of Old Mutual Wealth, announced it has provided better system functionality to help consumers and their advisers place drawdown business.

Adrian Walker, retirement planning manager for Skandia, said: “We welcomed the Chancellor’s changes to the retirement income market in last week’s budget and immediately focused on how we can deliver the new flexibility as quickly as possible for financial advisers and customers.

“Advisers and their clients can now take advantage of the new rules for existing as well as new drawdown arrangements and we expect to see increased take up of income drawdown as a result of these changes.”

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He admitted that the announced measures required “significant system changes for retirement income providers” but added that Skandia’s new system means clients can move to 150 per cent of the Government Actuaries Department rate from the start of their next drawdown anniversary.

Also, clients who want to enter flexible drawdown can do so at a lower amount of £12,000 in guaranteed retirement income.

The ability to get clients and advisers on the new rates was also announced by Axa Wealth. Mike Kellard, chief executive of Axa Wealth, said that the firm was ready to offer the new flexible drawdown income requirement of £12,000.

It is also able to offer the new triviality limit of £30,000 on its individual and family self-invested personal pensions, Retirement Wealth Account and Family Suntrust.

Additionally, the new GAD income levels of 150 per cent are available on these two products and, for those invested in the RWA who have selected to take the maximum income, this will be applied automatically.

Furthermore, Mr Kellard said that Family Suntrust can offer the new small pension pots limits, of £10,000 on three pots.

The GAD changes will be applied to Axa Wealth’s platform, Elevate, in April.

Mr Kellard added: “Since selling the legacy book in 2010 to Resolution, we have focused on being agile and responsive to market opportunities like RDR and now these ‘Big Bang’ Budget changes.

“Our changes will help ensure our clients benefit from the new flexibility around pensions as early as possible and will hopefully encourage many more people to save for their futures.”

Since the Budget announcement, annuity providers and income drawdown providers have been under increasing scrutiny; on the day of the Budget itself, traditional life and pension companies saw millions of pounds wiped off the value of their shares.

On the day of the Budget, 19th March, at close of the London Stock Exchange, Partnership’s share price had dropped 53.01 per cent, Just Retirement’s share price fell 42.42 per cent, Legal & General was down 8.37 per cent and Aviva was down 5.15 per cent.

Changes announced in the Budget included:

People in flexible drawdown need only show they have £12,000 in guaranteed income to be eligible. This is down from £20,000

Capped drawdown maximum income is to be increased to 150 per cent of the Government Actuaries Department rate, up from 120 per cent.