A number of pension providers with a flexible drawdown offering are introducing measures to discourage members from taking their entire fund in the first year.
Eight providers have confirmed they will offer flexible drawdown from April 6, including AJ Bell, Alliance Trust Savings, Hargreaves Lansdown, LV=, Premier Pension Services, Rowanmoor Pensions, Suffolk Life and The James Hay Partnership.
But clients of the James Hay Partnership will have to wait until the Finance Bill is given royal assent later this year before they can start drawing on their pension fund.
Only Premier Pension Services, a subsidiary of Jardine Lloyd Thompson, will launch a new flexible drawdown product while the remaining providers will integrate capped and flexible drawdown options into their current Sipp and SSAS products.
Existing Premier Pension clients will be charged a fixed fee of £600 for using the Premier Flex Sipp while new clients who take all their pension in the first year will be charged £800.
LV= has backed away from plans to impose an exit fee on flexible drawdown, deciding instead to offer flexible drawdown through its protected retirement plan. There will be no additional charges but customers will have to sign up to a fixed-term contract of three years.
AJ Bell will charge clients £75 for using flexible drawdown and £75 if they decide to take all their money out. Head of marketing Billy MacKay says the charges are purely to cover admin costs.
Alliance Trust will charge a set-up fee of £250, although there will be no closure fee if the entire pension fund is withdrawn.
Suffolk Life will integrate flexible drawdown into its Master Sipp product. Clients will have to pay a £300 levy if they choose to take their entire fund in the first year.
Rowanmoor Pensions and Hargreaves Lansdown have also committed to offering flexible drawdown through their existing products.
Rowanmoor will not charge any additional set-up or exit fee, although clients will have to pay £60 every time they change their pension income level.
Details of Hargreaves Lansdown’s charging structure had not been finalised at the time of Money Marketing going to press.