The problem for providers is prioritising changes to support the myriad of Finance Bill- related changes. As a provider clearly the first priority is to implement capped drawdown as this is what the majority new and existing drawdown business will flow into in a month’s time including existing ASP and USP arrangements. Flexible Drawdown was seen as an option only relevant for a minority of ASP and USP holders and a lot of changes including Terms and Conditions, product descriptions, product charges, processes and system will need to be changed before it can be launched so perhaps it is understandable that right now only a handful of providers have publicly committed to offering this option from day one.
Flexible Drawdown definitely requires a considerable amount of additional work for advisers and providers alike, partly because of the accompanying need to calculate policyholders’ minimum income requirement. Arguably advisers have the lions’ share of the work load as they must educate themselves about the changes first; then properly assess ASP and USP clients for suitability for either capped or flexible drawdown and explain these new options to them. Finally, they need to find out which providers are actually offering flexible drawdown and consider transfers away from providers that do not offer this option.
From the client perspective the fact that a typical 65 year old male client going into full drawdown with £100,000 of assets and moving from a USP to a capped arrangement will find that his maximum drawdown allowance has fallen by more than 16% to £5,100 per year, may also concentrate the minds of some who are at or close to retirement.
Commentary by Natanje Holt (MD Dunstan Thomas Holdings Limited)