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Royal London eyes investment restrictions for non-advised drawdown

Royal London will restrict the range of investments available to drawdown customers who refuse to take advice in an effort to reduce the risks presented by the Budget reforms.

The mutual insurer currently only accepts drawdown business on an advised basis. However, with Chancellor George Osborne’s pension freedoms set to radically alter the retirement landscape from April next year, providers are reviewing their offerings to deal with an expected surge in demand.

Royal London’s existing proposition allows savers, in conjunction with their adviser, to choose from a range of governed portfolios designed to suit different risk appetites.

Speaking to Money Marketing, Royal London intermediary chief executive Isobel Langton says the firm is reviewing its drawdown offering and plans to limit the investments available to “insistent” non-advised customers.

She says: “We will be urging people to take advice at the point of retirement and failing that we will try to get them to take the guidance guarantee.

For our current contracts we have governed income portfolios and we will probably restrict that range for non-advised customers.

“We will also make it clear that, if they take advice, there will be more choice available. The question is how can we make sure insistent non-advised customers get the safest solution possible?”

Langton adds the risk of regulatory comeback and complaints if customers enter an inappropriate drawdown contract post-April are also a concern for providers.

Worldwide Financial Planning IFA Nick McBreen says: “Non-advised drawdown is fraught with peril and just because people can do it doesn’t mean they should. Providers like Royal London risk straying into advice here and that is going to be a real nightmare for the industry.

“People are talking about annuity misselling at the moment but the same will apply if people take out the wrong drawdown contract. It is extremely difficult for providers to do drawdown without advice and there is potential for huge complaints down the line if things go wrong.”

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