Bringing you live news and features since 2006 

Skandia reports big increase in CRA flexible drawdowns


As financial advisers look for alternative solutions to provide customers with the most beneficial retirement income, Skandia has seen a rapid rise in flexible drawdown business on its Collective Retirement Account (CRA).

Since its introduction in 2011, flexible drawdown has provided eligible consumers with a viable alternative to purchasing an annuity. Skandia has seen business in this area increase by more than 200 per cent over the last 12 months, with over 1,000 flexible drawdown cases now written on the CRA.
According to Skandia, retirees and their advisers should address three key risks when developing a retirement income strategy: longevity, sustainability and inflation. Annuities, that provide a fixed level of income for the remainder of life, are the most popular way of providing income from pension savings, but do not automatically take inflation into account, unless clients are prepared to accept a significantly lower level of starting income. Currently most of the 400,000 people entering retirement each year select this approach. However, assuming inflation at 2.5 per cent, the 50 per cent of male 65 year olds who go on to reach aged 85 will see their annuity’s value reduced by 40 per cent in real terms in that time. Even at this historically low inflation rate, a loaf of bread will cost in excess of GBP2.10 in 20 years’ time.
Flexible drawdown is available to people who already have a secure pension income in place of at least GBP20,000.  Once this is secured from the state pension, a pension annuity or a company scheme pension, people can withdraw as much as they need from additional money purchase pension savings.  There are no annual income limits as there are for capped drawdown and their remaining money stays invested to rise or fall in line with the performance of the investments selected.
Flexible drawdown can be used to phase in the use of untouched money purchase savings to provide additional income more tax efficiently than capped drawdown as and when needed, ensuring clients keep as much of their pension savings as possible to pass onto beneficiaries in the event of death before age 75.
It also avoids the ongoing complex legislative changes that impact the maximum income available through capped drawdown. This enables clients and their advisers to look at pension savings as an asset alongside other savings when reviewing what assets should be used when, to meet future income needs.
Adrian Walker (pictured), pensions expert at Skandia, says: “It is clear that financial advisers are increasingly taking a broader view of their clients retirement needs, and as such are welcoming the more flexible solutions that are available.
“One of the reasons for our increased activity may be the higher number of individuals reaching State Pension Age. Some of these people will be receiving the most beneficial levels of State Pension provision, potentially coupled with final salary company pensions. This combination will provide an underpin of secure income that will make them eligible for flexible drawdown.
“We are encouraged to see more people looking at flexible drawdown to provide a suitable income in retirement from their money purchase pension savings and see this is an important first step in the industry moving away from viewing annuities as the ‘default’ solution.”

Latest News

BlackRock writes that May marked the highest inflow month of the year for both rates and high yield (HY) ETPs,..
SIX reported a combined 12.3 per cent trading turnover increase in CHF for its two exchanges in Switzerland and Spain..
EFAMA’s March figures reveal that UCITS and AIFs recorded net inflows of EUR24 billion, up from EUR21 billion in February...
VanEck has announced that the VanEck Semiconductor UCITS ETF has reached over USD2 billion in assets under management (AUM) after..

Related Articles

Darren Johnson, Komainu
Custody specialist, Komainu, was launched in 2018 as a joint venture between Nomura, digital-asset investment manager, CoinShares and blockchain business,...
Stuart Chaussee
In January this year, global data and business intelligence platform, Statista reported that there are now more than 8000 ETFs...
Ethereum coin
Last week saw Australia launch spot bitcoin ETFs, with Matteo Greco, Research Analyst at Fineqia International, writing that Monochrome Asset...
Timothy Rotolo, Range Funds
In 2023, Timothy Rotolo launched his business, Range Fund Holdings, the parent company for Range Indices and Range ETFs, followed...
Subscribe to the ETF Express newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by