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Old Mutual Wealth Adds New Facility Ahead Of Pension Freedoms In UK

Old Mutual Wealth in the UK has joined a trend of firms seeking to offer services as the country's pension fund industry enters the biggest change over investment freedoms in decades.
Old Mutual Wealth in the UK has added what it calls a flexi-access drawdown facility to its Collective Retirement Account, ahead of rule changes in April giving pension fund holders much more freedom on how to manage their investments. A number of other wealth managers are rolling out services to tap into this development.
The flexi-access drawdown option will be available to existing and new clients and their nominated beneficiaries, in the event of their death. It aims to give clients flexibility as to how they use their pension savings to provide retirement income - and the options for their remaining wealth on their demise, the firm said in a statement.
The firm, along with companies such as Hargreaves Lansdown, sees the pension rule shakeup as an opportunity to win new clients. Under reforms announced by the UK's finance minister, George Osborne, people holding defined contribution retirement savings schemes will, from the age of 55, be able to take this money out and won’t be forced to buy annuities to provide for their old age. (Annuities are, due to high bond prices, expensive and widely considered to be poor value.) People can, if they receive professional advice, also move funds from defined benefit pensions and turn them in defined contribution schemes. The government has also changed inheritance rules so that people can pass on pension savings without the current punitive tax rate of up to 55 per cent. Wealth industry figures predict tens of billions of pounds could be reallocated into new investments – creating a potential bonanza for wealth managers. Less benignly, such a change could tempt people into unwise savings or, worse, improvident spending.
“We believe that people should be trusted with their pension savings and so are pleased to be offering flexible access aligned with the new rules. However this isn’t about products or even the new rules, it is about people and their money. Each individual needs to fully understand their personal circumstances, looking at all of their savings, not just their pension before deciding on their future income planning,” Adrian Walker, Old Mutual Wealth’s retirement planning manager, said.
“With more flexible withdrawal options and new tax effective ways in which people can leave pension savings to nominated beneficiaries when they die, it can be argued for many that their money purchase pension savings should remain invested for as long as possible. There is a danger that people get carried away with the new freedoms if they don’t seek advice and as a result suffer unexpected tax bills or loss of future benefits. The Government’s Pension Wise guidance service should make people aware of the options and this in turn will lead to higher demand for financial advice,” he said.
The facility will be available to new and existing clients who will be able to set up monthly payments similar to a salary or to take ad hoc withdrawals from uncrystallised funds at intervals of their choice. The tax-free element can be accessed in one go upfront or in instalments as part of each ad hoc withdrawal.
The firm is not charging clients specifically for using the flexi-access drawdown option – they will be liable for the CRA’s standard platform fee and the underlying funds charges of their investment portfolio.