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Royal London drawdown sales spike as chief slams non-advised market

Loney-Phil-Royal London-2013
Royal London group chief executive Phil Loney

Drawdown and individual pension sales at Royal London rose by more than 60 per cent in the first half of 2017, but the provider has hit out at the non-advised market for failing to protect customers.

In its results this morning, Royal London said that it had seen a particular boost to individual pensions and drawdown sales from its drawdown governance service for advisers, which helps calculate sustainable income levels and produces client reports.

However, Royal London chief executive Phil Loney slammed providers who allowed non-advised customers to “sleepwalk” into their in-house offerings.

Data from the Association of British Insurers shows little shopping around when it comes to non-advised drawdown, with 94 per cent of sales made to existing customers, and recent FCA data also shows the proportion of drawdown bought without advice has risen from 5 per cent before the freedoms to 30 per cent today.

Loney says: “We think this is concerning as the best outcome for customers when choosing an income drawdown strategy generally occurs when they take financial advice, as the decisions are complex and can form a significant part of an individual’s retirement income. We are pleased that the FCA is looking at this area more closely, and our view is that they should do more to encourage individuals to take impartial financial advice when contemplating income drawdown.

“We are also concerned that some providers may be “sleepwalking” their existing non-advised pension customers into their own in-house drawdown offerings, repeating some of the poor practice seen in the historic annuity market.”

FCA launches major non-advised drawdown review

While Royal London currently does not offer non-advised clients a drawdown service, Loney said the provider was still planning to expand the help it gives those buying drawdown products without advice.

Loney says: “Royal London intends to develop a better value for money drawdown offering and tools for those clients who insist on the non-advised route, but such competition will only be a viable solution if the FCA takes action to open this part of the market up to competition.”



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What to expect from the FCA’s non-advised drawdown review

The announcement that the FCA is conducting a thematic review of non-advised drawdown came as no surprise to the industry. When pension freedoms were introduced two years ago, drawdown went almost overnight from something used mainly by high-net-worth individuals who received advice to a mainstream retirement income option available to those who do not necessarily […]

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There are 4 comments at the moment, we would love to hear your opinion too.

  1. In house, Non Advised Drawdown, is regulatory completely untenable, I understand Annuities were but Drawdown!!! This is a PPI bonanza on its way!!! I can not believe myself, agreeing with a Product Provider employee!!!

    • Trouble is Robert for clients there is no PPI style bonanza as these are unadvised self directed schemes (although considering how the FOS has worked with SIPPs as of late maybe there is a big risk). The truth is people cannot be protected from themselves on all occasions or they cease to apply their own due diligence when considering taking actions. It is a little like I don’t need to look when I cross the road but if I get hit by a car then they were at fault, and the police agreeing this is the case.

  2. Robert Milligan 18th August 2017 at 5:25 pm

    If the client wants to take 100% of their fund out of the Pensions arena without advice, Okay, but drawdown must and should only be done “Advised” and anyone who thinks differently, needs their head testing. Even I would bounce it through another adviser within my firm, and that’s after thirty years of giving advice.

  3. IMO, finds over £30K should include consideration of drawdown.

    However, for smaller funds there will be a point at which a gain of perhaps a few per cent on the outcome will be swallowed by advice fees.

    Customers should be told by providers that they should seek advice.

    However, I do not favour compulsion.

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