The review was primarily concerned with the non-advised drawdown market citing weak competitive pressure and low levels of switching.
94 per cent of non-advised customers took out a drawdown plan with their existing provider compared to just 35 per cent of advised clients.
The review also requires non-advised drawdown providers to remind customers annually of their chosen investment pathway and their ability to switch both product and pathway.
Furthermore, we note that the FCA is currently carrying out a review of the suitability of retirement income advice.
Bankhall’s head of advice oversight John Higginbottom agrees we will continue to see more transfers in drawdown.
He says: “Ongoing suitability, risks and costs have been the bedrock of the ongoing service consideration for flexi-access drawdown since drawdown came into effect in 1997.
"However, providers have been challenged by the retirement outcome review, along with recent FCA work on defined benefit and the advice suitability review.
"The combination of these factors is highlighting among other things the impact of costs and evidencing how these benefit the client.
"This cements the need to ensure that these factors are carefully considered and the outcome for the client is appropriate, whether this means staying in flexi-access drawdown or considering other solutions.”
He adds: “Ultimately, if costs can be reduced to clearly benefit the client then it’s potentially an easy win in helping to demonstrate value, along with other elements of the service.”
The growth in transfers in drawdown recommendations by financial advisers is positive for the industry.
For customers, it demonstrates advisers are continually reviewing their needs and recommending providers which offer quality and value for money. For regulators, it demonstrates a competitive market working for customers.
For advisers, it creates an opportunity to earn new fee income while creating value for customers at a time when new monies are more limited.
Transfers in drawdown provide the perfect opportunity as they are not new monies, but involve existing monies already in the pension system moving from one provider to another.
Such a shift will also affect providers who will be challenged to raise their game and improve the quality, flexibility and pricing of their drawdown propositions.
As more customers use drawdown policies in retirement, transfers in drawdown are destined to emerge as a significant theme for the industry for decades to come.
Tom Dunbar is distribution director at Royal London Intermediary
