Standard Life and Skandia will automatically increase drawdown income rates from 100 per cent of GAD to 120 per cent for investors who have chosen to take the maximum amount allowed under Government rules.
Chancellor George Osborne announced in his Autumn Statement in December plans to reinstate the 120 per cent income limit for drawdown investors from 26 March.
Standard Life and Skandia offer savers who want to take an income from their drawdown account two options; they can opt for a fixed monetary amount or they can choose to take a percentage up to the maximum of 100 per cent.
If they take the maximum Standard and Skandia will increase the income the investor draws automatically from 100 per cent to 120 per cent at their next drawdown review date.
Skandia retirement planning manager Adrian Walker says: “Where a client instructs us to pay the maximum, we will continue to do that until the investor or their adviser instruct us otherwise.
“So if they have instructed us to pay the maximum under the old rules and at the next review date they do nothing, we will automatically pay them 120 per cent of GAD rather than 100 per cent.
“We have communicated with advisers about this issue. If the client, in discussions with the adviser, decides they do not want us to pay the higher maximum then all we ask for is an instruction to that effect and we will pay a lower amount.”
A Standard Life spokesman confirms it has also contacted advisers and clients telling them it will automatically increase drawdown rates at the next review date for investors who instructed the provider to pay the maximum under the previous, lower limit.
Some other providers will not increase drawdown rates unless they receive an instruction from the client or their adviser.
Scottish Life business development manager Fiona Tait says: “Our view is that increasing drawdown rates is a decision that should be made by the client in consultation with their adviser. We will not increase drawdown rates automatically for anyone.”
A Legal & General spokesman says: “We will inform clients and their advisers of the change in the maximum income but we will not increase their pension income without receiving an instruction first.”
LEBC longevity director Nick Flynn says: “It seems a strange position for Skandia and Standard to shift to and I am surprised they have taken this approach.
“There will be drawdown customers who are not switched on and who will not realise they are stripping extra income from their fund, and if their investments don’t perform they could find themselves running out of money early.”