The Government is facing growing calls to reverse the decision to scrap capped drawdown for new customers from April 2015.
Currently, only people already in capped drawdown will be allowed to remain in the arrangements once the Budget freedoms come into force next year.
New customers will have only the option of using flexi-access drawdown products, which have no limits on the level of income that can be taken, and a restricted annual allowance of £10,000.
In September, Money Marketing asked whether there would be a surge in capped drawdown contracts as advisers moved to take advantage before the products are discontinued for new customers.
Now, Talbot & Muir head of technical support Claire Trott reports growing numbers of advisers want the capped option to remain after April.
She says not only do savers benefit from retaining the higher £40,000 annual allowance but the GAD rates used to limit withdrawals can help guide how quickly people should spend their pension pots.
Trott says: “We have been taking an increasing number of calls from advisers questioning their client’s ability to enter capped drawdown post-April next year.
“There seems little sense in stopping capped drawdown as it allows policyholders to monitor their income levels against a set standard without the need to lock in to an annuity.
“But the money purchase annual allowance rules may penalise those who don’t want to take advantage of the pensions reforms but want to use pensions as they were intended to provide a sustainable income in retirement.
“By accessing income of any sort, members will not have the flexibility to make larger pension contributions in the future should their circumstances change.”
Fortitude Financial Planning director Chris Bowmer says people who are “prepared to restrain their withdrawals” should be allowed to do so without suffering from a lower annual allowance.
He says: “If the Government is going to allow people to remain in capped drawdown, why not let them continue to enter it if they want to?
“You’ve still got the two sets of rules; you might as well keep them for everybody. People don’t know what their future is going to bring them. To commit to one course of action goes against the whole spirit of the new rules.”
There are also fears removing the capped drawdown option for new customers could create a two-tier system.
Portal Financial managing director Jamie Smith-Thompson says the Government needs to create a rule that is “fairer for everyone”.
He says: “Introducing a change that will allow certain people to contribute four times as much as other people is manifestly unfair and could prompt people to feel punished for the year in which they access their fund.
“This change is so big it is easy to envisage a surge in capped drawdown between now and April and the Government should take this into consideration and create a rule that is fairer for everyone involved.”