Old Mutual Wealth has announced its intention to launch a flexi-access drawdown in time for 6 April when the pension freedoms come into force.
The new drawdown options will be available to existing customers of OMW’s collective retirement account, as well as new clients and nominated beneficiaries in the event of a customer’s death.
Clients who are already in capped drawdown will be able to convert their account to Fad at any time from 6 April or will continue to use capped.
There is no specific charge to use any of the new facilities, and customers will only pay the normal underlying fund charges of their portfolio and standard platform charge.
New and existing clients will be able to set up monthly payments similar to a salary and have the ability to take ad hoc withdrawals from uncrystallised funds at intervals that suit them. The tax-free cash element – normally 25 per cent – can additionally be taken in full upfront or taken in instalments as part of each ad hoc withdrawal.
Old Mutual says the launch is aligned with the new rules because it believes people should be trusted with their pension savings. But the group adds the new product is not about the new rules, but about people and their money and individuals looking at all of their savings.
The much debated new pension rules come into action in just a few weeks’ time. Any new flexible withdrawal options and schemes will undoubtedly be welcomed by investors and advisers alike.
The biggest issue that could arise from the guidance guarantee is that people will get carried away with their savings, will suffer from tax bills they were not expecting and could see a loss of some future benefits.
The benefit of flexible access drawdown products will mean pensioners will be able to draw money more safely at a slower rate.
It is difficult to predict in advance how many people will opt for flexi-access drawdown but any new way of taking income payments is likely to become a popular choice.
Old Mutual Wealth is not the first group to announce a product like
this, but too much choice is not a bad thing. It is making pensions more accessible and giving greater options for pensioners when they come to retire.
This product can allow pensioners to take a lump sum amount and then continue to take monthly withdrawals for a stable income while leaving the rest invested for it to grow.
The additional benefit of flexible drawdown is that there are no income limits, so this product can be suited to different types of clients.