Skandia has revealed that less than 10% of its current flexible drawdown customers have taken, or are currently in the process of taking, the entire value of their pension savings. These figures downplay fears that UK retirees will withdraw all their retirement savings at once when the Chancellor’s proposed changes, announced in the recent Budget, come into full effect in April 2015.
Reaction to the Chancellor’s changes has been overwhelmingly positive, with many, including Skandia, welcoming the move to providing more flexibility in how future retirees will generate an income from their hard-earned savings.
However, the idea that those in retirement will have ‘complete freedom to draw down as much or as little of their pension pot as they want, anytime they want’, has generated some criticism that this could lead to retirees depleting their savings in one go.
But Skandia, which has been providing retirement income drawdown solutions since 1995, has moved to dispel this concern. Even within its capped drawdown business, where there are currently set limits on the maximum income available each year (recently increased from 120% to 150% of GAD), over 2/3rds of customers do not take the maximum income available. Many of the remainder are only doing so as part of a structured phased retirement plan which leaves as much of a client’s overall pension savings as possible untouched for delivery of future income.
Adrian Walker, retirement planning manager at Skandia, comments: “Fears of Lamborghini pension fund withdrawals are unfounded based on our experience of customer behaviour. In the words of Voltaire (or Spiderman’s uncle), ‘with great power comes great responsibility’ and our data shows that the vast majority of people can be trusted with the greater freedom around accessing their pension savings.
“It is significant to note that the overwhelming majority of our customers engage the services of a Financial Adviser. We therefore note the Chancellor’s plan to facilitate face-to-face guidance for all those approaching retirement and look forward to contributing to the Government’s consultation.”
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