The cost of delay

Helen Morrissey asks whether providers will be ready for the introduction of flexible drawdown in April and asks why other providers prefer to delay until later in the year

As the industry prepares for the introduction of flexible drawdown advisers will be keeping a close eye on which providers will be offering the service from April. So far several providers, mostly the smaller SIPP firms have said they will be ready on time with the larger pension providers mainly deciding to focus on introducing capped drawdown for April with flexible drawdown following later in the year. So how much demand will there be for flexible drawdown post April and what are the potential issues the industry could face?

Alliance Trust’s head of pensions, Steve Latto confirmed the SIPP provider would be in a position to offer flexible drawdown post April 6 but admitted the timetable for implementation had caused issues.

“We will be ready but it is fair to say that the process has been rushed,” he says. “It’s not long since the process was announced and HMRC guidance won’t be published until the end of March. We then have to hope that no further changes are made when the Finance Bill gets Royal Assent in May - we have had a lot to deal with.”

Standard Life’s head of pension policy John Lawson confirmed the insurer would delay the introduction of flexible drawdown until later in year as he believes there will be more demand for capped drawdown instead.

“We won’t offer flexible drawdown in April but we look to offer it later in the year – our priority is capped drawdown,” he says. “I’m not convinced a lot of people will want to go into flexible drawdown in April anyway as you are paying a lot of tax to get your money out. You will see smaller providers coming in from day one but I think they could charge quite a lot for it. You may get some people switching to providers who offer flexible drawdown but they might meet some substantial front end charges for doing so.”

Why delay?

While some of the larger providers have preferred to focus on introducing capped drawdown in April, others have put the delay in introducing flexible drawdown down to myriad other factors such as updating systems.

AJ Bell’s director of sales and marketing, Billy Mackay says the firm will be ready to offer flexible drawdown from April and confessed to being “a bit surprised” by those blaming system updates for the delay.