Explaining drawdown at Parsonage Financial Planning

Flora Maudsley-Barton: I’m Flora Maudsley-Barton, I’m MD and financial planner here at Parsonage Financial Planning. We’re based up in Altringham in the north west. Most of our customers are individuals, so retirement planning is a big part of what we do and drawdown is obviously quite a big part of that.

When I’m explaining drawdown products to clients, I’m making an effort to really explain to, to use a story rather than to use jargon. So, I avoid words like FAD, flexi-access drawdown, really until the very last minute, because they don’t mean anything to customers. I need to know those terms and I need to know how those products work and how they fit together, but my customer only needs to understand how it applies to them.

They need to know that I’ve ruled out the wrong things and rule in the right things, but they might not necessarily need to know all the jargon on the way there. For me, the most difficult part of explaining drawdown is life expectancy. Thankfully, most of us don’t know the answer to the question, ‘How long do we need this for?

When am I going to die?’ and that’s great, but many also find it difficult to anticipate how they’ll need money for and it does lead people to underestimate a little. I feel that there are plenty of drawdown products available Personally, my first choice is usually-, of the drawdown products, my first choice is usually flexi-access drawdown, because it doesn’t necessarily trigger the money purchase annual allowance

Next choice is uncrystallised pension fund lump sum, UFPLS, but even though really that’s only two products day, we can blend them together and we can still use cap drawdown. Some customers still have cap drawdown and of course small pots is another option to remove money from a pension, and of course, there’s the annuity as an option.

So, I feel like there are lots of different types of drawdown products. I think client’s like drawdown because they like control, the perception of control. I also think that drawdown is obvious to customers, it’s quite instinctive to them, the idea that they will spend during retirement that which they built up in the run-up to retirement and if they can have their basic needs met with a final salary pension or with a state pension and any other source, then drawdown is obviously attractive. Also, if it’s a large fund then drawdown can be attractive. I don’t think it’s ever a no-brainer though. I think there are always advantages of secure options and there are always advantages of flexible options.