And finally there's growing compliance and regulatory pressure on reviewing providers as customers move into drawdown and take income.
The FCA’s Retirement Outcomes Review sought to improve transparency and disclosure to drawdown customers. The review was primarily concerned with the non-advised drawdown market, citing weak competitive pressure and low levels of switching. 94% of non-advised customers took out a drawdown plan with their existing provider compared to just 35% of advised clients.
The review also requires non-advised drawdown providers to remind customers annually of their chosen investment pathway and their ability to switch both product and pathway. Furthermore, we note that the FCA's currently carrying out a review of the suitability of retirement income advice.
Bankhall’s head of advice oversight John Higginbottom agrees we'll continue to see more transfers in drawdown. He said: “Ongoing suitability, risks and costs have been the bedrock of the ongoing service consideration for flexi access drawdown since drawdown came into effect in 1997. However, providers have been challenged by the retirement outcome review, along with recent FCA work on defined benefit and the advice suitability review. The combination of these factors is highlighting among other things the impact of costs and evidencing how these benefit the client. This cements the need to ensure that these factors are carefully considered and the outcome for the client is appropriate, whether this means staying in flexi access drawdown or considering other solutions.”
He added: “Ultimately, if costs can be reduced to clearly benefit the client then it’s potentially an easy win in helping to demonstrate value, along with other elements of the service.”