IFAs could tap into a £11bn market if they would advice their drawdown clients in older style contracts to transfer to a new provider, says Scottish Equitable.
The Edinburgh-based insurer suggests many clients with older contracts, which would have been set up less sophisticated investment planning than can be found today, could benefit from changing their contract as it is vital for advisers to clearly understand a client's risk profile and their retirement objectives when giving advice on drawdowns.
Furthermore, Scot Eq also believes the proposal set out in the Pensions Bill - which will allow a minimum withdrawal of £1 per year on drawdown policies - will add another benefit as it will allow more of the drawdown pot to be preserved.
However, IFAs wishing to advise their clients on drawdown should, according to Scot Eq, be looking at following points:
- Is the client in a modern contract with lower charges?
- Does the provider allow drawdown on protected rights?
- Does the existing contract have multiple tranches of benefit, alll with different review dates, which would be simplified by consolidation to a single review date on transfer?
- Is the client restricted by a lack of investment choice?
- Does the provider get the right payment to the right bank at the right time and provide accurate information for the annual and triennial reviews?
- Does the provider have a bespoke risk profiling tool?
John Joe McGinley, individual pensions marketing communications manager, says: "Drawdown has a tough few years with falling investment returns. Advisers can make their client's money work harder for them by ensuring that they are in an arrangement with a modern charging structure and wide investment choice."
He continues: "The increased income withdrawal flexibility proposed in the new tax regime should widen its appeal."IFAonline
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