This new development, available from Nov 16, means that Old Mutual Wealth’s Collective Retirement Account (CRA) now provides advisers and their customers with complete flexibility in how their untouched pension savings are accessed under the new pension freedom rules.
Specifically, the new option provides optimum tax efficiency of withdrawals by allowing customers to use the least amount of pension capital to deliver their monthly retirement income needs. Once an instruction is made for regular withdrawals, the process is automatically repeated, including any associated benefit crystallisation event calculations.
Advisers and clients will be able to control the tax they pay on regular monthly income withdrawals by drip-feeding their tax-free cash lump sum in order to provide the required income, build a drawdown fund for future use, or combine monthly tax free cash withdrawals alongside of taxable income to deliver their monthly income needs. This is instead of taking all their tax free cash in one go.
Using tax free cash in this way avoids the need for clients to withdraw larger tax-free cash sums which they have to re-invest outside of a pension tax wrapper to deliver regular income needs. These options also ensure that clients retain as much of their pension savings as possible for future retirement needs and also to increase the potential legacy value that can be passed on in the event of their death.
To accompany these new choices, Old Mutual Wealth has also upgraded the functionality of its Retirement Income Explorer Tool (RIET), which allows advisers to map out a client’s income plan, using the most tax-efficient method available across all investment assets a client holds either on or off platform.
Using a sophisticated stochastic modeller, the tool helps advisers bring to life a range of probable outcomes, based on realistic forecasts of variables such as life expectancy, investment returns and inflation. The interactive process results in clearly written reports, which can be branded with the adviser’s logo, that will help to demonstrate the value of advice by illustrating likely outcomes in retirement dependent upon the choices a client makes.
The tool will also help advisers to regularly review the initial planning with their clients. It will enable advisers to take account of changing circumstances in health, income needs and changing values of underlying wealth that clients may have.
Adrian Walker, retirement planning manager at Old Mutual Wealth, comments: “These new retirement income choices within the CRA allow advisers and clients total flexibility over how they create tax-efficient withdrawals from pension savings.
“Combined with the sophisticated RIET tool, the CRA now enables advisers and their clients to achieve almost any available combination of taxed and tax-free income that they choose as part of any client’s retirement income planning – whichever and whenever suits the client’s retirement income journey the best.
“Since the pension reforms were announced in March 2014, we have constantly been looking to enhance the service that we offer advisers and their clients. The CRA was built with flexibility in mind and has been delivering flexible income options for advisers and clients for many years, but I’m delighted that these latest enhancements will significantly increase the solutions we have available.”