18th February 2015
Hargreaves Lansdown has unveiled details of its new retirement drawdown plan, which is set to launch on April 6 to take advantage of new rules offering pensioners greater freedom over how they draw an income in later life.
Fidelity has also confirmed that its operations will be ready to support the pension income changes through all its business channels in time for April.
Hargreaves said it is the UK’s first company to unveil the terms of a new drawdown plan to make use of the new legislation. The product has which has no set-up or income withdrawal charges.
Tom McPhail, head of pensions research, Hargreaves Lansdown: “We have made this new drawdown accessible by stripping out any upfront charges and developing a suite of information and planning tools to help investors make the most of their retirement savings. This is what the government’s pension freedom revolution is all about; giving investors the tools and information to take control of and responsibility for their own retirement income, as well as financial advice if they need it.”
Hargreaves Lansdown said it has already received over 175,000 requests for information relating to the new regime and annuity sales have halved in the year since the 2014 Budget, meaning there are estimated to be between 200,000 and 400,000 people waiting to take advantage of the new freedoms in the first weeks and months after 6 April.
McPhail added: “The Financial Conduct Authority and the Government are beavering away to produce the final rules and regulations which will apply from 6th April. Given the uncertainty over whether the pensions industry would be ready in time, we think investors will be reassured to see this first product launch in good time for the new pension freedoms. Drawing on our experience as the UK’s leading direct to consumer drawdown provider and annuity broker, we have been able to launch our new drawdown product in plenty of time for investors to register their interest ahead of 6th April.”
All existing charges relating to the set-up of new drawdown plans and any income payments will be scrapped from 6 April. Currently Hargreaves Lansdown charges £75 + VAT to conduct the Government Actuary’s Department income limit check on new Capped Drawdown plans and a £295 + VAT set-up fee for new flexible drawdown plans.
This week (17 February) also marks the first date on which a pension provider is able to accept requests for transfers of a capped drawdown plan into the new flexible drawdown. They won’t actually be able to use the new rules until after 6 April, however, based on current demand we anticipate that some investors will want to set the wheels in motion as early as possible.
The table below explains how the new plan compares to the existing drawdown options:
Fidelity has confirmed today that it will be ready to support pension freedom across all its UK business channels from April 2015. But it warns that being operationally ready will not be enough and calls on the industry to ensure customers have access to the support they need to make pension freedom a success.
Richard Parkin, head of retirement at Fidelity Worldwide Investment, said: “The success of the new freedoms hinges not just on enabling people to access their pension savings or offering new products, but on the ability of the industry to engage with their customers and help them make the right, informed choices on their options.
“The freedoms offer a fantastic opportunity for people to get more from their retirement savings but simply making the freedoms available is not enough. People will need expert help to make good retirement decisions. Those with an adviser will already have this but, for those who do not, we believe that providers must look to ensure that customers achieve a good outcome. Fidelity has reviewed every part of the customer journey and built in extra checkpoints for these customers to ensure they are making the right choices.”