Platforms declining to offer the full range of pension withdrawal products with only drawdown widely available, is putting advisers at risk of claims they are not acting in the best interests of clients.
Consultancy firm the Lang Cat found just 53 per cent of advisers use a platform specifically for decumulation, that is to enable clients to manage the withdrawal of their retirement savings.
The Lang Cat’s founder Mark Polson said that what made this particularly disappointing was the fact some of the most popular platforms did not offer “the most basic features” for decumulation.
He said things became “even more worrying” when advisers were asked if their platform of choice had full decumulation functionality, with 93 per cent incorrectly saying it did.
Mr Polson said: “We’ve shown that the range of decumulation functionality on many is limited, but the overwhelming belief or perception is that this isn’t the case.
“Are some firms ignoring any evidence that doesn’t support their platform selection case? That there were very few comments on this matter is perhaps revealing.”
Among the worst performers, according to the Lang Cat’s analysis, were Nucleus and Alliance Trust Savings, which were missing seven of the 11 features the consultancy firm asked about.
The former did not provide uncrystallised funds pension lump sum (UFPLS), tax-efficient withdrawal tools, a consolidated drawdown pot, portfolios designed for drawdown, guaranteed income products, outstanding allowance reports and consolidated income payments.
Alliance Trust Savings did provide UFPLS but did not provide natural income options.
Aviva’s platform was missing six features, including guaranteed income products, natural income options, portfolios designed for decumulations and UFPLS, while Cofunds was missing five.
Both Standard Life Wrap and Transact provided all 11 features.
Rory Percival, a regulatory consultant and former technical specialist at the Financial Conduct Authority, said advisers were risking falling foul of the rules by not using a well-designed platform with all the necessary features for decumulation.
He said: “It doesn't surprise me. In general I think advisers do not adequately consider their client banks, segment and design investment solutions and advisory services to suit their client segments.
“I think the use of the same platform in decumulation as they do in accumulation is a good example of this.
“The platform is something where the status quo bias is most likely to play out because most of the benefits of using it sit with the advice firm, and not with the client so the inclination to use the platform which works for them is quite strong.”
He said advisers could fall foul of rules aimed at making sure they consider their clients’ best interests, rather than suitability rules, since the platform is a service not a product.
The Financial Conduct Authority has previously raised concerns about advisers using only one platform, saying it is "unlikely" firms will be able to meet the independence rule while doing so.
Elsewhere in its research the Lang Cat also asked each platform a series of questions, including whether one regular consolidated payment can be made to the client from across all wrappers.
Only two of the 14 platforms answered ‘yes’ – Zurich and Elevate.
Just two platforms said wrappers could be prioritised for regular withdrawals – AJ Bell and Cofunds – while six said there are auto-alerts where there was not going to be enough cash to pay income.
Barry Neilson, chief customer officer at Nucleus, said some of the features were ones it had chosen not to offer while others were currently in development.
He said: “For example, when we spoke to advisers on this they much preferred the option of having flexi-access drawdown rather than UFPLS. We work closely with advisers, and won’t waste time or money developing things they don’t need.
“Generally we are agnostic about tools, whether this is for tax-efficient withdrawals or anything else – it’s up to advisers to decide what tools are best based on what they are trying to do for clients.
“Clearly, advisers are the ones who are best placed to choose the most suitable platform for their retirement clients.”
Meanwhile an Aviva spokesman said flexi-access drawdown is the principle platform proposition for its platform and is suitable for most customer decumulation needs.
She added: “Advisers can also design customised portfolios using the range of funds available on the platform which will cover most decumulation requirements.
“We have also launched an income management tool which allows advisers to design and monitor the income from portfolios to make it easier to ensure the funds selected meet client decumulation needs.”
A spokesman for Aegon, which now owns Cofunds as well as its own platform, said it is currently working to combine the two to offer more choice on Cofunds.
But he highlighted that figures from the Financial Conduct Authority showed the number of people buying income drawdown each quarter has doubled since the introduction of pension freedoms.
He said: “The Aegon platform was built specifically to enable people to move from accumulation to decumulation and contains features such as retirement and income planning tools, full income drawdown and decumulation portfolios.
“By contrast the Cofunds business has traditionally been focused on Isas rather than pensions, and as a result there’s less functionality to support people with specific retirement income needs.
“However, users of Cofunds will soon begin moving across to an enhanced version of the Aegon platform.
“One of the benefits of the process is that Cofunds users will gain access to Aegon’s decumulation functionality while Aegon users will benefit from Cofunds’ features like pre-funding of switches and natural income.”
Alliance Trust Savings and the FCA did not respond to a request for comment.
damian.fantato@ft.com
