Royal London to launch a new 'early warning' Drawdown Governance Service
Royal London plans to launch a new service to help advisers review their clients’ drawdown plans to ensure they are on target to meet their objectives
21 march 2016
Since the introduction of the pension freedoms in April last year, Royal London has seen an increase in the number of individuals choosing an income drawdown plan to secure their future income. There was a 67% increase in sales of Royal London’s income drawdown product, Income Release, in 2015 compared with 2014.
As a market leading provider in the drawdown market, Royal London is currently developing a new online Drawdown Governance Service that will help advisers to quickly and easily assess the sustainability of their client’s income on a regular basis.
Recent research* shows that customers, particularly those new to income drawdown, could potentially face financial detriment if they are unaware of the consequences of key risks such as investment risk, inflation risk and longevity risk. The service acts as an ‘early warning’ to advisers that their clients might not be on track as planned. For example, any unexpected withdrawals will be immediately ‘red flagged’ for potential further investigation and the client’s details automatically prioritised on the adviser’s client review list.
The new Drawdown Governance Service will help advisers with clients in Royal London’s Income Release drawdown plan to:
- Summarise all their clients, potentially at risk of not meeting their agreed income objectives;
- Compare the projected and actual performance of individual drawdown plans ;
- Assess the sustainability of the target income against agreed objectives;
- Produce easy to read client reports, for advisers to use at client reviews;
- Provide historical evidence of client reviews and help advisers to meet their compliance requirements;
- Link to other Royal London support services, such as the Individual Income Planning tool.
Royal London commissioned NMG Consulting to carry out impartial research on Royal London’s Drawdown Governance Service.
Jane Craig, Research Partner at NMG Consulting, said: “The new service will meet a need in the market for advisers wanting to make the drawdown review process less onerous and provide comfort for their clients that they are on track for their goals in retirement. The service provides reassurance for advisers concerned about future liability further down the line and it will provide the evidence the regulator is looking for to show they are being proactive.”
Fiona Tait, Pensions Specialist at Royal London, commented: “There are encouraging signs that people are acting sensibly following the introduction of the pension freedoms - but it is early days. For those customers that choose to use drawdown as their income producing vehicle it is particularly important that they understand that their income needs to last into their ‘old age’. Drawdown investments are subject to specific risks, such as sequencing risk as well as the effect of inflation or market events. The new service will help to flag these issues, so an adviser doesn’t discover too late that a client’s underlying fund is no longer able to support their income objectives.
The new Drawdown Governance Service is designed to simplify and yet improve the review process enabling advisers to deliver financial advice profitably, while equipping their clients to make crucial decisions on the variety of risks that they will face.”
Advisers looking for more details on the launch of the new Royal London Drawdown Governance Service should speak to their normal Royal London contact or go to http://adviser.royallondon.com/drawdowngovernance
For further information please contact:
|0207 506 674
Notes to editors
Royal London was one of the first providers to offer a flexible drawdown plan and the Royal London’s income drawdown product - Income Release, available since December 2007. As at year end 2015, Royal London had over 51,000 live Income Release policies. More details on Royal London’s income drawdown plan are available from financial advisers or online at http://adviser.royallondon.com/incomerelease
*Link to the Independent Review of Retirement Income - Building a Consensus around Retirement Income, Report by David Blake, March 2016 http://www.pensions-institute.org/IRRIReport.pdf
The impartial qualitative review of the Royal London Drawdown Governance Service across a range of advisers was conducted by NMG Consulting in December 2015.
About Royal London:
Royal London is the largest mutual life, pensions and investment company in the UK, with Group funds under management of £84.5 billion. Group businesses provide around 9.1 million policies and employ 2,988 people. (Figures quoted are as at 31 December 2015).