Prudential's Vince Smith Hughes and Annuity Line's Billy Burrows took part in the latest Retirement Planner Conjecture debate to answer your queries on the income drawdown market.
Income drawdown has been described as misunderstood, underused and undervalued. Do you agree?
Billy Burrows: Well, yes. Traditionally drawdown has always been seen as a product for high net worth clients. One of the things that has happened over the last three years – in particular with low interest rates, people retiring earlier – is that drawdown is becoming more appealing to what I call this middle Britain cohort.
Vince Smith-Hughes: Clearly the time is challenging for annuities with rates as they currently are, so my sense is that advisers are looking for alternatives. Obviously drawdown has been through some difficult times but I am now starting to sense that advisers are starting to look at it seriously again.
In the past it was very much people had either an annuity or income drawdown. Are you still seeing people doing that? Or are you starting to see people mix and match a bit more?
Vince Smith-Hughes: IFAs are adopting more of this mix and match approach. My sense from talking to some of the retirement specialists is they are now considering this cocktail solution as much more of a normal approach than they would have done a couple of years ago.
Billy Burrows: It is really important to be customer centric. The more we can help clients articulate what their objectives are, the better advice we can give.
So for example, if somebody approaches retirement and says they just want their tax-free cash and they are not ready to take income yet, that is a drawdown. If somebody comes to retirement and says they must have the highest level of guarantee, it is a conventional annuity.
Of course if people say they want the best of both worlds, flexibility and some guaranteed income, the opportunity to stay invested and death benefits, then that utilises income drawdown and annuities.
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