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Changes to income drawdown rules to dramatically effect annuity purchase, says Skandia

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The vast majority (80%) of financial advisers believe that the recent reforms to income drawdown rules will result in more people delaying their annuity purchase, according to Skandia’s latest Adviser Confidence Barometer.

The new income drawdown rules implemented on 6 April 2011, which introduced capped and flexible income from the age of 55, have simplified and made income drawdown more flexible. This increased flexibility and control that income drawdown now offers individuals in planning how to take their retirement income especially beyond age 75, is driving the popularity of income drawdown. With income drawdown becoming an increasingly attractive retirement planning option for individuals it is expected that more people will delay purchasing an annuity in favour retaining control of their pension capital by using income drawdown for longer.
 
Whilst the use of the range of income drawdown options is expected to grow following the implementation of the new rules, drawdown still remains an emerging option for retirement planning. This is supported by the data in the adviser confidence barometer which revealed that 1 in 5 of advisers (18%) thought that income drawdown was appropriate for more than half their clients. The majority (59%) believe income drawdown is currently appropriate for between 10% – 30% of their clients but the research suggests this is set to grow.
 
Adrian Walker (pictured), head of retirement planning at Skandia, says: “Income drawdown has always been popular for those who have sought greater control of their retirement income. The sweeping changes to drawdown rules takes this one step further, making income drawdown more flexible and more accessible than ever. With the changes in legislation around the flexibility of taking pension benefits beyond age 75 linked to the wider new income drawdown rules, we expect more people will delay their annuity purchase in favour of using income drawdown – and the data from our adviser confidence barometer supports this. With this in mind, we expect the income drawdown market to grow stronger than ever.”

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