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Zurich confirms non-advised drawdown launch

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Zurich will launch a non-advised drawdown product for its workplace saving customers this month.

In July, Money Marketing revealed the insurer was preparing to allow over 200,000 members of the occupational schemes it operates to enter a new drawdown product without an adviser.

Savers will have to have at least £30,000 to invest in the product and will be able to take just tax-free cash or tax-free cash with regular or ad-hoc payments.

Investors need to be on Zurich’s corporate savings platform but have the option to make an internal transfer from other policies.

Charges have not been revealed though Zurich says they will “depend on the features of the customer’s existing scheme and individual fund selection”.

Head of retirement propositions Rod McKie says: “We continue to believe that financial advice is the best way to help most consumers achieve their desired outcome in retirement.

“However, experience from the first six months of the pension freedoms has shown that a sizeable number of customers feel confident about making retirement decisions for themselves.

“While we remain fully committed to the adviser market – and recommend that customers seek advice or at least guidance from Pension Wise – there is an appetite for non-advised drawdown and making this option available to our workplace members will help them take full advantage of the pension changes.”

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  1. “a sizeable number of customers feel confident about making retirement decisions for themselves”. Really? Might it not be a good idea to try to establish on just what this confidence is based and if it really is confidence or something else? What about knowledge or experience or the ability to make their own choice of funds or to make any sense of their periodic review packs? Will they be provided with a Type A Critical Yield illustration and, if they are, will they be able to make any sense of it? Will they be able to decide for themselves what is and what is not a realistic target Critical Yield? Will they be able to appreciate that this Critical Yield may well be knocked for six in the event of a severe downturn in the value of their invested fund?

    In my experience, this new surge in enthusiasm for DrawDown is based primarily not on confidence in it, still less just how it works and the risks involved, but on an ingrained aversion to annuities. There seems to be a widespread yet frequently misplaced belief/assumption/hope that it [DrawDown] offers some sort of magical formula for extracting a quart from a pint pot.

    The reality is that DrawDown at a rate higher than that of an equivalent (non-enhanced) annuity poses a high risk of capital erosion, the eventual consequence of which may well be early fund burn-out. How many people then will regret not having bought an annuity, at least with part of their fund/s, and be looking for someone to blame (and to claim against)? If they did it on a non-advised basis, there’ll be no one but themselves, though they may well have a go anyway at the facilitator, on the basis that they weren’t provided with adequate (or reasonably understandable) information/guidance/warnings as to the potential pitfalls of spurning advice/not considering the annuity option/selecting an unsustainably high rate of income withdrawal, etc, etc. And there’ll be plenty of CMC’s out there only too willing to “assist”.

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