What can I do if my provider doesn’t offer drawdown?

Posted By: Phil Handley DipPFS AwPETR On June 20, 2016 Category: Pension drawdown

Many existing pension providers are still not offering drawdown to their existing clients.

The majority of our enquiries are from people who have been left in limbo when trying to turn their pension into an income.

One of the main providers for this is Phoenix Life, a traditional consolidator of pensions. Over the years they have transferred a number of different life companies under the Phoenix Life brand. These include:

  • National Provident Life
  • Guardian Assurance Limited
  • London Assurance Limited
  • Pearl Assurance Limited
  • London Life Linked Assurance Limited

Since the pension reforms and the increased appetite for pension drawdown, people with these policies are now finding it difficult to find a drawdown provider.

What are my options?

As with any pension fund, you have the right to shop around with your savings. This involves deciding which of the pension options is right for you and then speaking to the providers to obtain quotes.

If you want to assess the flexibility of drawdown there are a vast array of providers and thousands of funds available. It can therefore be quite overwhelming where to start.

If you’re not experienced with investments but want to access drawdown, we’d recommend seeking advice from an independent financial adviser.

They can listen to your needs, wants and objective and recommend the most suitable plan and group of investments.

It’s important to understand the drawdown plan you are using for your pension as the wrong choice could cost you thousands in fee’s and may not last as expected if you chose the wrong investments.

Planning is the Key?

Unlike an annuity which is an income for life, a drawdown plan is a pot of money which could ultimately run out if you don’t plan your income.

At the stage of choosing a drawdown provider you should choose a plan which has the features you need and not end up paying for features you’re not going to use. Many of the larger providers offer plans to suit the mass market meaning there will be some people who end up in these which could do better elsewhere. Everyone’s situation is different and choosing a plan to suit your situation could save you in additional fee’s which the larger providers levy.

You should also conduct a risk profile exercise to determine the types of investments your portfolio should hold. By rule of thumb this should be a well-diversified portfolio including cash, bond, property and shares. It should be spread across both geographical regions and sectors. This approach limits downside risk whilst taking advantage of global opportunities.

If you end up with the wrong mixture of investment funds, your fund could be too volatile and run out sooner that you expected.

The next thought in the planning process is how much income you want or need to take out. The level of income will ultimately help determine the types of investments you should consider.

It is often worth putting together an income and expenditure forecast to see what your actual needs are. Financial advisers do this through the use of a cash flow forecast. This can project an investment growth rate together with taking inflation into consideration. It can dictate the income taken and help plan a more sustainable retirement.

Once a provider and investment portfolio is chosen, the transfer of funds can take around 6 weeks. The new drawdown provider will take care of the administration after you’ve given instructions though an application form.

For those who are faced with moving their pension fund because their existing provider doesn’t offer drawdown, the above are important considerations before a move. For those whose provider offers drawdown, it is also worth shopping around to get a better deal.