Canada Life has launched three retirement income products – Pension Investment Plan, Flexible Drawdown Plan, and Fixed Term Income Plan – to suit the changes made in the pension freedoms and give customers new ways to access their defined contribution pension savings.
The Pension Investment Plan is ideal for those with multiple pension plans and who want to consolidate them into one arrangement, or those who wish to take lump sums from their pension plan.
Withdrawing uncrystallised fund lump sums directly from this plan can be arranged on a regular or ad hoc basis, and the first 25 per cent of each withdrawal is tax-free.
Remaining funds can be allocated to the Flexible Drawdown plan, allowing the individual to access all or part of their tax-free cash entitlement. Transfers from any UK-registered pension arrangement or another provider’s drawdown plan can be transferred into the product.
At the end of the term, customers in the Flexible Term Income Plan can reinvest for another term, move the guaranteed maturity value to a flexi-access drawdown, purchase an annuity or withdraw the guaranteed maturity value as cash.
Annual management charges are divided so that they are charged on a monthly basis rather than one annual lump sum.
A proliferation of innovative products was expected to follow the pension reforms, but so far many providers have erred on the side of caution. Many have created tools to help advisers combine products for their clients, but few have come up with anything new.
These products are a hybrid of existing ideas, but offered in a new way that allows for greater flexibility to switch between offerings. The provider reported a 30 per cent increase in customer enquiries since the pension freedoms took effect, stating that about 75 per cent of these calls have been from individuals who want to cash in their pension pots. Only 8 per cent of the calls had sought guidance from Pension Wise prior to calling Canada Life.
This combination of products and extended options offered by Canada Life may run the risk of confusing the average consumer, but could prove beneficial with the help of an adviser to explain the options available.