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A swift change to retirement income rules is required in order for the Government’s proposed pension reforms to work, according to leading investment business Skandia, part of Old Mutual Wealth.

Skandia believes that references in The Finance Act 2004 to the many different ways of taking an income from a defined contribution pension scheme, including lifetime annuities, short-term annuities, capped drawdown, flexible drawdown and scheme pensions, should be scrapped and replaced with a simplified model in order to ensure the reforms deliver the simplicity and clarity for the consumer they promise.

The Chancellor’s Budget announcement in March raised the prospect that consumers will have more access to their pension savings than ever before, but they are still likely to be faced with a bewildering array of options as the rules currently stand.

Skandia says there only needs to be three options for withdrawing money from a defined contribution pension:

1)      A tax free lump sum (for the first 25% of a withdrawal), and

2)      (for the remaining 75% of a withdrawal) A taxable lump sum,  or

3)      Applying funds to a retirement income product

This model produces a number of solutions to meet consumers’ changing needs. A combination of tax free and taxable lump sums will meet the need for tax efficient income. A tax free lump sum and a retirement income vehicle (which could be drawdown, annuity or a hybrid of the two) will satisfy the need of those who need a large withdrawal to re-arrange their finances, for example to pay off an interest-only mortgage.

Adrian Walker, retirement planning manager at Skandia, comments: “We believe that the overly complex rules governing annuity and drawdown products need to be abolished. All that is necessary are sensible rules regarding how money is extracted from a defined contribution pension scheme.

“Following the Budget announcement, consumers are expecting it to be easier to access their pension savings. If product rules remain their expectations will be frustrated by the restrictions on choice that will still exist.  While people like to have a choice, they don’t like to choose so if we can simplify the options available to them, we are likely to see greater engagement with their retirement savings.”


Notes to editors:

About Quilter plc:

Quilter plc is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

Quilter plc oversees £118.1 billion in customer investments (as at 30 September 2018).

It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset investment solutions and discretionary fund management.

The business is comprised of two segments: Wealth Platforms and Advice and Wealth Management.

Wealth Platforms includes the Old Mutual Wealth UK Platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

Advice and Wealth Management encompasses the financial planning network, Intrinsic; Quilter Private Client Advisers; discretionary fund management business, Quilter Cheviot; and Quilter Investors, the Multi-asset investment solutions business.

The Quilter plc businesses are being re-branded to Quilter over a period of approximately two years:

• The Multi-asset business is now Quilter Investors

• Intrinsic to Quilter Financial Planning

• The private client advisers business is now Quilter Private Client Advisers

• The UK Platform to Quilter Wealth Solutions

• The International business to Quilter International

• The Heritage life assurance business to Quilter Life Assurance

• Quilter Cheviot will retain its name

This press release is for journalists only and should not be relied upon by financial advisers or customers.

Please remember that past performance is not a guide to future performance. The value of investments and the income from them can go down as well as up and investors may not get back any of the amount originally invested. Exchange rate changes may cause the value of overseas investments to rise or fall.

This communication is issued by Quilter plc.  Registered office: Millennium Bridge House, 2 Lambeth Hill, London EC4V 4AJ, United Kingdom. Registered number: 6404270.  Registered in England.