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Providers race to prepare for new pension drawdown max

Providers are facing a race against time to alter drawdown propositions to offer savers access to the new, higher maximum income withdrawal limit from 27 March.

In his Budget speech on Wednesday Chancellor George Osborne announced a reform package that will mean everyone can take their entire pension pot as cash from April next year.

The Government is also introducing a series of interim measures designed to give savers more flexibility when drawing their pension.

These include increasing the maximum amount a person in income drawdown can take each year from 120 per cent of GAD to 150 per cent and reducing the flexible drawdown minimum income requirement from £20,000 to £12,000.

These changes will come into effect on 27 March.

Having initially said it did not expect to offer the new, higher capped drawdown limit, Prudential now says its systems will be ready for the new rules.

Prudential operations director Tulsi Naidu says: “Prudential has been able to respond quickly and thoroughly to the changes announced in the Budget. We’re ensuring customers are treated fairly and helped with the transition from the old to the new rules.”

Aviva was unable to confirm whether it will be able to amend its proposition ahead of 27 March.

An Aviva spokeswoman says: “We are working through the changes now with a view to be ready next week.”

Legal & General, which offers both capped and flexible drawdown through its Sipp subsidiary Suffolk Life, says it will adjust its proposition to accommodate the changes ahead of 27 March. Skandia and LV= also say they will be  ready to offer the new limits from next week.

Aegon regulatory strategy manager Kate Smith says: “We are doing everything we can to get these new limits in place before 27 March.”

Scottish Life spokesman says: “We are making the necessary system changes now and we will be ready for the new drawdown regime from Thursday next week.”

Standard Life head of customer solutions Alistair Black says: “In line with the changes, Standard Life will provide flexible drawdown with a £12k minimum income requirement from the 27 March and will be able to offer eligible existing customers and new customers a monthly income set at 150 per cent GAD from that date too.

“While our quotation system will continue to quote at 120 per cent GAD for a short while after the 27 March deadline, we will be able to pay customers a monthly income at 150 per cent GAD from that date.

“We are working to update the quote system and will be keeping customers informed throughout.

“We would encourage people to seek professional guidance before increasing their GAD limit to ensure they maintain a sustainable retirement income.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. A week may not be a generous time scale, but how difficult can it be to make an adjustment like this?

    That aside, I await with interest and anticipation Prudential’s Retirement Income Bond. These latest changes surely render such a product more viable than ever.

    BTW, does anyone know whether or not the punitive 55% death tax on unspent funds post-vesting has been reduced or, better still, removed altogether?

  2. For most large pension providers the changes required are substantial, across a number of computer systems, manual and automated processes and documents all of which have need amendment, approval of changes by technical experts, compliance and legal and IT resources to make coding changes and carry out testing before implementation. Then the changes need to be communicated internally, to advisers and consumers – some of whom will be in the process of purchasing drawdown or an annuity or reviewing their income when the goalposts moved etc.

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