Pensions - Articles - No such thing as a typical drawdown customer


According to research from Royal London income drawdown customers are taking full advantage of pension freedoms to take their income in a variety of ways .

 According to data from its Drawdown Governance Service (DGS) – a tool used by advisers to assess their clients’ income sustainability - people are taking income at rates varying from 4% to 10% depending on their pot size and income needs. An income withdrawal rate of 4-5% a year has traditionally been considered sustainable. However, the data showed two broad groups of customers using income drawdown in different ways.
 
 The group with smaller pots (below £25,000) tended to take their income at a higher median rate of approximately 10%. Although a withdrawal rate of 10% would be unsustainable for a pot designed to last through retirement, many of those drawing down a pot at this rate are likely to be planning to rely on other income later in retirement. For example, they may be running down one pot to support them in early retirement before their state pension and other retirement income kicks in at a later stage
 
 However, the group with larger pots of over £250,000 are taking income at a much lower median rate of 4%. See table below for spectrum of income rates in the sample we looked at.
 
 
 
 Commenting on the data, Royal London’s head of investment solutions Lorna Blyth, said: “What the data tells us is that following the introduction of pension freedoms there is no such thing as a typical income drawdown customer. Regardless of pot size people are utilising income drawdown to help them structure a retirement income that meets their needs. Client segmentation is a key focus under PROD rules and this data shows a link to taking income according to a client’s needs rather than wealth. Using our Drawdown Governance Service helps advisers to track whether clients remain on track to meet their retirement income goals and forms a basis for discussion if changes need to be made.”
  

Back to Index


Similar News to this Story

ACA welcomes climate risk guidance for pensions
The Association of Consulting Actuaries (ACA) has published its response to the Pensions Climate Risk Industry Group (PCRIG) and DWPs consultation on
Trustees should be better equipped to manage climate risk
The Taskforce on Climate-Related Financial Disclosures (TCFD) consultation closed at 11.45pm yesterday, Amanda Latham believes trustees have been give
FTSE350 pension deficit rises as COVID19 lockdown continues
Mercer’s Pensions Risk Survey data shows that the accounting deficit of defined benefit (DB) pension schemes for the UK’s 350 largest listed companies

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.