Aviva says drawdown is “unlikely to be appropriate” for savers with pension pots worth less than £30,000, echoing similar remarks made by the FCA.
In its written evidence to the Work and Pensions select committee, published this week, the insurer said guidance should be able to direct people away from drawdown for pots under £30,000. However, it says this would currently constitute advice.
Last week, FCA head of investment David Geale said drawdown was not likely to be suitable for pots under £50,000.
Experts hit out at the remarks, claiming the FCA is “clueless” and arguing suitability should not be defined by pot size.
But Aviva has questioned whether it is appropriate for individuals to use pots under £30,000 for drawdown despite new freedoms announced in this year’s Budget.
In its submission the firm states: “If the customer has under £30,000 of retirement savings, drawdown is unlikely to be appropriate, yet currently the non-advised guidance would state that highlighting this was classed as advice.”
In its submission to the committee, Which? called for drawdown to convert from being niche to being mass market with low charges.
Aviva head of policy John Lawson says ithe firm’s current drawdown limit is £30,000 but it has not set its level for next April yet.
He says: “On the £30,000 point, the actual threshold will depend on the needs and circumstances of the individual.
“For example, drawdown for someone with no other pensions (or state pension), a £100,000 fund and a £5,000 annual fixed expenditure need may not be appropriate; an annuity is more likely to give them the security of income they need.
“On the other hand, drawdown for someone with a DB pension of £5,000, a state pension of £7,500 and an annual expenditure need of £10,000 may be perfectly suitable even if their pension pot is only £20,000.
“So, it really depends on the individual saver but in general terms, the more pension savings you have, the more likely it is that drawdown will be an suitable choice.”