Impact of flexible drawdown limited

Pension provider Mattioli Woods has poured cold water on the direct impact that flexible drawdown reforms will have on the retirement market.

The new rules, set to come into force on April 6, will allow investors to withdraw up to 100 per cent of their pension fund provided they can demonstrate a minimum income requirement of £20,000. This will include the state pension, defined-benefit savings, scheme pensions and lifetime annuities.

The Treasury’s simplification of the previous administration’s plans has been praised by the industry, the April 6 deadline has forced the biggest insurers to abandon hope of providing the facility until the second half of this year at the earliest.

Sipp and Ssas specialist Mattioli Woods will offer flexible drawdown through its current product range from April 6 but sales and marketing director Murray Smith expects take-up to be “limited”.

He says: “The Treasury clearly has a flexibility agenda in savings so I think it wants to get the word flexible into as many things as possible.

“The reforms create access to pension capital at a level never seen before, which will have a significant psychological benefit, but the practical application for mainstream pension planning is limited and we expect the take-up and use to be modest.”

Official Treasury estimates suggest that around 50,000 people will be eligible for flexible drawdown.

Burrows & Cummins partner Billy Burrows says: “Insurance companies are not going to find flexible drawdown attractive because there is no money in it for them. It will probably be the preserve of the providers that charge fees.”