The Big Question

Each month, we ask leading industry figures to answer one big question... How well prepared do you feel the industry is for the advent of capped and flexible drawdown?

Adrian Walker is head of ­retirement ­planning at ­Skandia

The short time span from the ­government announcing the changes to the implementation date of 6 April has presented a challenge.

The delay in providing GAD tables applying from that date has given providers very little time to implement the changes to capped income levels. It will not only be clients moving into income withdrawal for the first time on or after 6 April, but those whose current five-year income periods will end at or shortly after that date and who will be subject to the new income factors.

Many providers will initially focus on delivering what has to be done for 6 April for capped drawdown. This means flexible income may not be ­widespread at 6 April, although it will be more widely available as the year progresses.

Vince Smith-Hughes is head of business development at Prudential

Despite the fanfare around these changes, Flexible drawdown will not be accessible to the whole market though it will be of interest to many who’ve accumulated d­efined benefit pensions which when ­combined with the state ­pension means the minimum income ­requirement is met.

While the industry is ­embracing these changes, it is important that they are ­implemented as smoothly as ­possible, from seamless back-office operations to suitably tailored products and ­communication.
 
Richard ­Mattison is business development director at James Hay Partnership

The principles of capped and ­flexible drawdown are fairly straightforward – the problem lies in their automation.

Most pension providers run operations through ­complex computer software. Amending these systems within weeks is not usually possible.

Furthermore, all literature and other procedures have to be re-drafted and signed off by legal and ­compliance departments. In short, the ­industry is not well prepared and some providers, particularly the large will struggle.

Murray Smith is marketing and sales director at Mattioli Woods

While most advisers and ­providers have welcomed the new rules, many had argued for ­implementation in April 2012 to give the industry time to prepare.

Bespoke providers working with smaller numbers of clients will be better placed to prepare in time, although the smallest of these may find costs prohibitive. ­Mattioli Woods will provide capped and flexible drawdown through its existing SIPP and SSAS from 6 April.

John A ­Whitehead is senior ­benefit consultant at Buck ­Consultants

Advisers wishing to anticipate the changes from 6 April must act on the assumption that the Bill will not differ from HMRC’s draft ­legislation. Developments in the meantime will be have to be monitored closely.

The ability to operate the new rules will depend upon the ­drawdown providers adapting their ­systems while not knowing what the ­final rules could contain. The big ­providers are unlikely to be ready before the end of this year.

Simon Nicol is pensions director at BDO ­Investment ­Management

As a business, we have been ­discussing with our clients the new rules, and the potential flexibility this will offer. However, it is not an option that many seem likely to take up in April.

The capping of the income ­drawdown limit is of more ­immediate importance, and there does not appear to be an ­understanding among those ­relying on high levels of income that ­income limits will reduce.

The industry is informing clients and intermediaries about steps that can be taken to secure the current higher income levels. Nevertheless, the ­reduction in ­income at the next review may come as a shock.