Scottish Widows 

Scottish Widows offers drip feed drawdown

Scottish Widows offers drip feed drawdown

Scottish Widows is to allow clients to withdraw their tax-free lump sums over time as part of their regular income strategy.

The provider has added drip feed drawdown to its retirement account, allowing advisers to divide 25 per cent of their clients' pension pots into monthly, quarterly, bi-annual or annual withdrawals with no minimum rate prescribed.

The feature will allow savers to stay invested while complementing their regular income and will not trigger the money purchase annual allowance, Scottish Widows stated.

It is designed to allow advisers to better manage the overall tax position of their clients.

Catherine Stewart, head of individual propositions at Scottish Widows, said: "It is all about tax optimisation and drip feed drawdown will allow people to have some tax free cash on a regular basis for example if they are reducing their working lives.

"It also allows advisers to reduce their time [spent on administrative issues] and cost as it offers a good level of automation."

The tool offers automated regular crystallisation and disinvestments. 

It also recognises the need for liquidity within the retirement account to support payments and automatically checks if there is sufficient cash available. 

If there is not, it disinvests from available Scottish Widows funds to enable this to happen.

Drip feed drawdown is offered free of charge and completes the firm's retirement range, although it is observing the market with a view to innovating further, a spokesman for the provider said.

Scottish Widows recently launched four retirement portfolio funds designed to help protect income, by reducing equity exposure when certain acceptable volatility thresholds are reached.

Alistair Cunningham, financial planning director at Wingate Financial Planning, warned of the restrictions within drip feed drawdown, such as offering a narrow range of investment funds for the drip-feeding.

He said: "[Drip feed drawdown] is of some use, but normally comes with such restrictions I would not go out of my way to use a plan that could fund tax-free payments in instalments as opposed to all upfront. 

"Where individuals do receive the tax-free element upfront it is relatively trivial to put it in a savings account and set-up a monthly standing order."