There is a last minute surge of people opening capped drawdown contracts as advisers rush to take advantage before the April deadline, new data reveals.
Sipp provider Suffolk Life has seen a 250 per cent increase in the number of people entering capped drawdown, compared to normal levels. It says over 150 people a week are taking on contracts, compared to about 60 previously.
From April new customers will not be able to enter capped drawdown, with all new contracts written under the flexi-access drawdown rules. These customers will have a restricted annual allowance of £10,000 and no limits on withdrawals, while existing capped drawdown customers will retain the £40,000 cap as long as they do not break GAD limits.
Suffolk Life pension technical manager Paul Evans says: “The increased numbers of capped drawdown applications are not surprising as advisers have shown great interest during the past few months in how investors may benefit from capped drawdown.
“Capped drawdown may benefit investors who need some of their fund now, for example to start a new business, but intend to put money back into their pension in the future. However, advisers should consider whether the benefits of additional flexibility outweigh the review costs and income limitations for their clients.”
Talbot & Muir head of technical support Claire Trott says: “We have seen a marked increase over the last few months of enquiries and then action from advisers and clients, resulting in entering capped drawdown with small amounts of their fund to ensure they are able to stay in capped in the future and to protect their ability to contribute going forward should they wish to.”