Discussions with clients on this point are absolutely vital. Do they view it as a 55 per cent charge, or a 45 per cent return of an asset they would have kissed goodbye to had they purchased an annuity?
But there is a risk of retirees looking to avoid the potential loss of an annuity and inappropriately entering into drawdown, according to Dentons.
“It must be properly understood and advised upon,” says Martin Tilley, director of technical services at the firm. “Getting 45 per cent of the pot back on member/spouse death might prove to be too tempting and pull into drawdown some clients whose fund is of a size where it might not be economical to run.
“Total returns from inappropriate drawdown and sums on death might be lower than those payable from a simple conventional or impaired-life annuity.”
Some providers still require clients to annuitise at 75, so it is worth checking the terms of any contract if the client wishes to stay in drawdown indefinitely.
There are multiple opportunities for advisers to assist clients with income drawdown. For many clients, retirement is the first point of contact they will have with an adviser; providing a robust, ongoing service is a strong way of keeping that client on the books for many years to come.
