Royal London is launching an “early warning” system for advisers with clients in its drawdown product.
The mutual saw a 67 per cent increase in sales over 2015 but cautions new drawdown customers face “financial detriment” if they are unaware of issues such as inflation and investment risk.
The new service will alert advisers if clients make unexpected withdrawals, for example.
Non-advised customers will not have access to the warning system, however the provider says it does not technically offer this group drawdown.
Customers can make ad-hoc withdrawals from pots but this is not written under drawdown contracts.
The move follows Professor David Blake’s Labour-commissioned report into the pension freedoms which recommended tighter controls on drawdown products.
Royal London says advisers will be able to summarise all their clients at risk of not meeting income targets, compare different drawdown products, assess sustainability and produce client reports.
Pension specialist Fiona Tait says: “There are encouraging signs that people are acting sensibly following the introduction of the pension freedoms – but it is early days.
“For those customers that choose to use drawdown as their income producing vehicle it is particularly important that they understand that their income needs to last into their old age.
“Drawdown investments are subject to specific risks, such as sequencing risk as well as the effect of inflation or market events. The new service will help to flag these issues, so an adviser doesn’t discover too late that a client’s underlying fund is no longer able to support their income objectives.”