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ScotWids plans £10k minimum for non-advised drawdown

Savers with more than £10,000 in their pension pots will be able to enter into a Scottish Widows drawdown contract without an adviser, chief executive Toby Strauss says.

In July last year, Money Marketing revealed Scottish Widows was planning to launch a simplified drawdown product.

Now the provider is firming up its offering. Customers with over £10,000 will be able to enter non-advised drawdown with “semi-default” funds designed around how long customers plan to keep their money invested.

Scottish Widows chief executive Toby Strauss says: “In April there will be a non-advised simplified drawdown with some new fund choices which are designed for that new world of whether you want to leave savings in cash for a short period and then take it out, whether you want to leave it invested or whether you want to buy an annuity.”

Customers will be able to choose from “inner” or “outer” funds.

Strauss says: “There’s an inner ring of semi-default funds and then the full traditional retirement account beyond that. We expect the vast majority of people to pick from the simple defaults.

“The funds are designed around how long money will be invested. It’s a semi-cash fund if you take it out fairly quickly, there will be a balanced managed fund if you want to stay invested, and there will continue to be the kind of annuity matching fund if you want to buy an annuity but you’re likely to defer that decision for a while.”

ABI sales figures published yesterday show drawdown is rapidly growing in popularity, while annuity sales continue to fall.

Final results announced today show the insurance division of Lloyds Banking Group, which includes Scottish Widows, saw underlying profits fall by 15 per cent in 2014 to £922m, down from £1.1bn in 2013.

The provider blames the fall in profits on the impact of a £100m hit from the charges cap on auto-enrolment funds and a “significant reduction in the volume of annuities purchased as a result of deferring because of the Budget changes”.

Strauss says the fall would have been higher but was offset by better-than-expected sales of new corporate pensions business and a strategy of investing in higher-yielding assets.

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. On the one hand there will be people who want to have a DIY drawdown – on the other hand it is simply too difficult for most people to do themselves

    If someone does a botch job in their house they can call a builder to repair the damage

    If they do a botch job on their drawdown they will not be able to repair the damage

  2. So SW has taken the line that if you have a SW pension you are encouraged to transfer to a simplified drawdown product with decumulation default fund(s) without advice, thus by passing advisers and Pension Wise. Is this encouragement good for the client or SW? I suspect that SWs figures suggest that the numbers accepting their default suggested annuity will fall, therefore, to maintain profitability, they have found another solution. So if someone phones up SW and tells them ‘I want to take a 25% tax free lump sum from my pot they will say ‘yes sir, sign here. To comply with regulations we will transfer the balance to our default fund. The payment will arrive in 5 working days’
    How TCF is this?

  3. Simplified Drawdown is an oxymoron!

  4. So SW has taken the line that if you have a SW pension you are encouraged to transfer to a simplified drawdown product with decumulation default fund(s) without advice, thus by passing advisers and Pension Wise. Is this encouragement good for the client or SW? I suspect that SWs figures suggest that the numbers accepting their default suggested annuity will fall, therefore, to maintain profitability, they have found another solution. So if someone phones up SW and tells them ‘I want to take a 25% tax free lump sum from my pot they will say ‘yes sir, sign here. To comply with regulations we will transfer the balance to our default fund. The payment will arrive in 5 working days’
    How TCF is this?

  5. I wonder if non-advised transactions will make any reference to the amount of guaranteed income someone needs in retirement to meet their bills?

    We’re seeing the regulator raise concerns at the thought of clients having being sold internal annuities without any mention of Enhanced options or OMO – surely a client sleepwalking into drawdown needs to be made aware of the features and benefits of a secure and guaranteed income for life?

  6. What was it 2 or 3 months ago? that Aviva got caught out mis selling/buying annuities……
    Having seen the first efforts at ‘signposting’ pensionwise, its quite literally nailed on to an already confused last few pages of a retirement pack.

    It will be interesting to see if either the FCA or government act on this.

  7. Let’s not forget for Scottish Widows, read Lloyds Banking Group!

  8. Call me cynical but the recommended min fund for SIPP investment appears to have dropped somewhat…discuss

  9. Please keep this in perspective. This is only £10,000 we are talking about. £7,500 after tax free in a default SW fund is probably a better than the net figure (£1,000 initial charge quite likely from many “advisers” ) after an IFA Adviser charge. And how much would anyone charge each year to “Advise” on the
    remaining smaller fund. Assuming an after adviser fund of say £7000 the fund would need to grow at 5% pa to simply pay a £350 annual advice fee. I would think that the only way to TCF here would be not to give advice at all and let the fund be dealt with on the least expensive default option available.

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