Standard Life is warning of a capacity crunch in income drawdown next year as it estimates a third of consumers will opt to access their pension that way.
Following the pension freedoms announced in the Budget, the provider says there will be a five-fold increase in the number of people choosing income drawdown from next April, from 6 per cent of retirees currently to 30 per cent.
The provider says platforms’ operational capability will be “sorely tested” as a result.
Standard Life head of adviser platform propositions David Tiller says: “Many platforms have yet to make the transition to fully clean and unbundled share classes and are having to devote considerable resources to the ongoing conversion in the run-up to the sunset clause in April 2016.
“Having to also build additional scalability to cope with drawdown demand will put even more pressure on their systems.
“The process for setting up and managing drawdown is much more involved than setting up an annuity. Assets need to be invested and often complex withdrawal arrangements made – this is not a ‘light touch’ process for platforms.
“The assets moving into drawdown will also require conversion on many platforms, so the potential for delay and disruption when drawdown is requested could be high for platforms that aren’t prepared.”
Standard Life estimates that a provider which currently deals with 2,000 drawdown customers will be dealing with 10,000 next year, and 20,000 in 2016.