Fiona Murphy goes through the results of this month's Inquiry and asks advisers how income drawdown is developing
Deloitte recently said income drawdown can be used to increase retirement incomes by up to 20%. However, despite this finding, Deloitte partner, Richard Slater described income drawdown as “misunderstood, underused and undervalued.” Is this truly the case?
Slater also claimed drawdown could become more widespread if providers develop products that generate higher levels of income and protect capital.
He is right in that the market needs some development before it has a major growth spurt. Another interesting idea recently put forward by Rowanmoor Pensions, was linking the underlying assumption of GAD rates to ill health rates.
However, there are also those who have said over the past year, the link to annuities should be completely severed. The government has said it will review GAD rates but it is unclear what position it will take. In the meantime, it is clear that income drawdown is growing as a popular choice among retirement planning advisers.
In this month’s Retirement Planner Inquiry, we asked advisers to tell us their thoughts on income drawdown and their experiences of advising in this area.
We distributed the survey via email to Retirement Planner readers with responses received from 44 advisers.
Present and future
In our first question we asked: Do you advise on income drawdown? The majority (86%) of advisers confirmed they did, while 14% said they did not (see chart one).
So we asked our respondents in the ‘no’ camp to explain their reasoning. If you do not advise on income drawdown can you please explain why, we asked. The majority said they were not advisers or they advised on alternative pension products such as SIPPs.
However, one adviser said “Most of my clients preferred taking the maximum pension commencement lump sum at retirement and guaranteed pension annuities.”
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