Since the introduction of the pension freedoms, Royal London has seen an increase in the number of individuals choosing an income drawdown plan to secure their future income. There was a 67% increase in sales of Royal London’s income drawdown product in 2015 compared with 2014.
Royal London is currently developing a new online Drawdown Governance Service that will help advisers to quickly and easily assess the sustainability of their client’s income on a regular basis.
The service acts as an ‘early warning’ to advisers that their clients might not be on track as planned. For example, any unexpected withdrawals will be immediately ‘red flagged’ for potential further investigation and the client’s details automatically prioritised on theadviser’s client review list.
Fiona Tait, Pensions Specialist at Royal London, commented:
“There are encouraging signs that people are acting sensibly following the introduction of the pension freedoms - but it is early days. For those customers that choose to use drawdown as their income producing vehicle it is particularly important that they understand that their income needs to last into their ‘old age’. Drawdown investments are subject to specific risks, such as sequencing risk as well as the effect of inflation or market events. The new service will help to flag these issues, so an adviser doesn’t discover too late that a client’s underlying fund is no longer able to support their income objectives."
