Old Mutual Wealth is simplifying its charging structure by removing the annual pension drawdown fee and scrapping the current minimum charge on its platform.
The changes will come into effect on 1 January 2015 and are designed to make Old Mutual Wealth better value for smaller investments and for customers looking to take advantage of the new pension withdrawal rules.
The decision by Old Mutual Wealth to remove its drawdown fee, currently set at GBP58.20 per annum, comes in the wake of the Government’s Budget pension changes which come into effect in April 2015. The new rules giving greater flexibility to how people access their retirement savings are likely to result in an increasing number entering drawdown instead of purchasing an annuity. Around 8,000 Old Mutual Wealth customers currently in drawdown will benefit from the removal of the charge.
Currently anyone with investments of less than GBP20,000 on Old Mutual Wealth’s unbundled charging basis pays a minimum charge of GBP8.33 per month. The removal of the flat minimum monetary charge creates better value for smaller investments and ensures the charging structure can be easily understood by both financial advisers and customers.
Tom Hawkins, head of financial solutions at Old Mutual Wealth, says: “By removing our drawdown fee and the current minimum charge on the platform our customers will only pay one fee. Additional layers of charges, such as those for switching, drawdown or exit charges are hazardous for customers as they can never fully predict future behaviour and therefore how much they will pay in the longer term.
“Following the Budget announcements, we believe drawdown charges should become obsolete. People will be given greater freedom as to how they access their pension savings and they will not expect to be charged extra for those freedoms. For providers, the new rules will remove much of the administration associated with income drawdown making an extra charge unnecessary. We are making this option more affordable for people at a time when it is becoming more attractive.”