Phased Drawdown Post 2015

Triumph13

I had been put off the idea of phased drawdown in the past by the costs - but it suddenly occurred to me that these should reduce massively post 2015. With there no longer being a need for a separate GAD calcultaion for each tranche, I can't think of any reason why the pots would need to be administered separately at all so would people expect the admin costs to be minimal in future?

If I can get a cheap SIPP that lets me effectively crystalise one year's income at a time, paying an effective 15% tax rate, that would seem like an incredibly simple and stress free approach and one that should attract enough customers to be very viable for the provider.

Can anyone see any downsides on this approach?

atush

that was my thinking but who knows? Ie costs going down.


I hadn't thought of your idea, but sounds feasible.

mania112

i'm not sure the need for gad calculations per tranche is the reason for the costs.

gad calculations will still be done - clients will still need to be informed of the recommended withdrawal amount.

mania112

and what you want to is already done by many retirees - good idea

Dunnit

Will prices not be along the lines of flexible drawdown?

dunstonh

I had been put off the idea of phased drawdown in the past by the costs

Phased drawdown costs no more than other drawdown methods.

but it suddenly occurred to me that these should reduce massively post 2015.

I dont see why. The GAD calculation barely impacted on cost. Indeed, requirements may well go up from a regulatory and disclosure point of view. I reckon the FCA will be concerned over the risks of people eating their funds too quickly.

atush

mania112 wrote: »

i'm not sure the need for gad calculations per tranche is the reason for the costs.

gad calculations will still be done - clients will still need to be informed of the recommended withdrawal amount.

Well given some of the extra costs were specifically added for the extra GADs I am thinking they have to come down in cost.

If they dont, anyone who paid one in the past will have a possible miss sale?

dunstonh

atush wrote: »

Well given some of the extra costs were specifically added for the extra GADs I am thinking they have to come down in cost.

If they dont, anyone who paid one in the past will have a possible miss sale?

What makes you think GAD calculations will go away? Yes, they will not be needed but a different calculation will likely need to be supplied. I suspect the disclosure requirements will go up and various data will need to be supplied. I cannot see the FCA allowing what it classes as a high risk transaction to go without increased disclosure including perhaps calculations on what is classed as a risky level of draw, sensible level etc.

Triumph13

I would hope though that this could largely be handed over to an 'intelligent system'. You log on to your account, say what you want to draw, it gives you the warnings and runs a simple calc on what a GAD withdrawal might be, you go through several pages of compliance acknowledging that you've read it and are choosing to ignore it and it processes the transaction. Something similar happens now when I draw money from my mortgage account.

What there shouldn't be, particularly if done with 100% withdrawal on each tranche, is the need to maintain a separate account for each crystallised pot and redo the calculations on it every three years.

atush

dunstonh wrote: »

What makes you think GAD calculations will go away? Yes, they will not be needed but a different calculation will likely need to be supplied. I suspect the disclosure requirements will go up and various data will need to be supplied. I cannot see the FCA allowing what it classes as a high risk transaction to go without increased disclosure including perhaps calculations on what is classed as a risky level of draw, sensible level etc.

Because if they aren't 'needed' in law then maybe they wont charge extra for them? In the DDs I looked at, there was a specific charge for a GAD either every 3 years or on request.

I agree withdrawing your whole pot is high risk, but if a GAD is no longer required under law not sure how this will factor in charges in future.

Triumph13

It will also be interesting to see hpow they handle phased drawdown from a risk perspective. Drawing your whole pot is indeed high risk. Crystalising 3% of it each year and drawing the whole of that rather less so!