Threat of easy access strikes fear into UK pension providers

Published:  12 Nov at 6 PM
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UK pension providers are likely to see a massive increase in the number of 100 per cent drawdown applications following next April’s take-up of the new pension rules.

One of the UK’s largest drawdown providers, Standard Life, fears that many thousands of pension holders will decide to take full drawdowns, swamping its call centres and online site. The company and its competitors are planning to upgrade their facilities and allocate enough resources over the next several years to allow for a huge increase in new drawdown requests.

At present, Standard Life drawdowns total around 2,000 per year. Ongoing forecasts suggest that 2015 will see an increase to 10,000, with another 10,000 per year increase in 2016 and 2017 respectively. Across the industry, the total of new drawdowns is expected to top 200,000 within the next few years.

A spokesman for the company said that drawdown platforms across the industry are likely to be swamped to capacity far faster than was initially expected. Until the March budget announcement, he added, drawdowns were a niche market, but are now expected to become mainstream very quickly both in the UK and in expat destinations worldwide.

Pension providers are already feeling the pinch caused by the dramatic drop in annuity sales since March, and are struggling to find new sources of revenue to compensate. Another problem for pension companies will be caused by tax issues related to drawdowns, as the providers are responsible for the initial calculations.

At present, Standard Life deals with 50,000 pensions, paying out some £600 million each year. According to the spokesman, the company’s present systems are unable to cope with a huge increase, nor are those used by other UK pension providers.
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