Personal Pension  

LV= simple drawdown option for pension schemes

Daniel Liberto

As part of the plan, clients with an LV= personal pension with funds in excess of £37,000 after the tax-free cash allowance will be able to access income drawdown for £175.

Clients with funds below £37,500 will also have access, but will be required to pay an initial fee of £295.

To be eligible for the plan, -clients must start with a single premium or transfer of at least £20,000, and have a minimum pot of £30,000, including tax-free cash.

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Since the Budget changes were announced, numerous providers have sought to adapt their propositions in line with the new environment.

From 27 March, the government slashed the minimum requirement for pensioners entering flexible drawdown from £20,000 to £12,000, and raised the maximum GAD limits for those in capped drawdown from 120 per cent to 150 per cent.

LV= responded to these chan-ges by launching a specialist team dedicated to devising new products that enable consumers to take advantage of more liberal income drawdown rules.

The retirement specialist launched its low-cost pension in February 2012, which comes with an annual service charge of 0.25 per cent, or 0.1 per cent a year for assets over £1m. From this plan, advisers can switch clients into self-invested pension plans.

The simple drawdown option will be offered alongside LV=’s guaranteed income drawdown and self-invested income drawdown propositions.

Provider view:

Richard Rowney, managing director of LV= Life and Pensions said: “We have launched this product in direct response to the changing retirement landscape, and subsequent adviser demand for a low cost and simple drawdown solution. This product will be offered alongside our guaranteed income drawdown and our self-invested income drawdown proposition. Our aim is to work with advisers to provide the retirement income options that meet clients’ needs. We recognise that clients who would have had little choice but to annuitise to take benefits, now have various options. This option provides them with a way of accessing income drawdown and/or accessing their tax-free cash.”

Adviser view:

Richard Wadsworth, financial planner for Edinburgh-based Carbon Financial Partners, said: “For me, this is appealing. It is simple, low-cost and accessible for modest-sized pots. There should be a range of suitable funds available within the contract for most advisers. I do not like complex, costly arrangements – I want to understand the risks as best I can, and some of the guaranteed-style arrangements make this difficult. With drawdown, the amount of risk and, therefore, return you secure in comparison to the amount of income you take out determines whether the fund value goes up or not. Thus it is pretty simple. LV= has a wide range of funds that most advisers would be happy with, and these can be combined to produce the required level of return. I think many individuals will consider drawdown in the future, be that ‘full gutting’ of pension funds or a gradual ‘dribble out’.”

Charges:

Clients with a pension pot of £37,500 or more will be charged an initial fee of £175, while those with smaller pots will be charged £295. LV=’s personal pension scheme charges 0.25 per cent a year, or 0.1 per cent a year for assets over £1m.”