Scottish Widows drops hybrid drawdown launch hint

Iain McGowan

Scottish Widows has suggested that it is set to launch a hybrid drawdown product later this year.

The firm hinted at the move via a new magazine launched this week aimed at advisers.

In the publication, the provider notes the FCA’s observation “that product innovation has been limited for mass market investors in drawdown” and alludes to “announcements on that front later this year” from Scottish Widows.

Scottish Widows head of fund proposition, Iain McGowan, writes: “The Government’s expectation that the would drive new innovation in the market has not yet been fully realised. In the drawdown market in particular, pressure is growing on the industry to support sustainability of income in retirement.

“The preference for both investors and advisers has been to enter drawdown, rather than buy an annuity. However, products that provide investors with sustainability of income, potential for capital growth and, ultimately, peace of mind, remain conspicuous by their absence.

“Many advisers are navigating this area by helping clients manage a phased strategy, initially with drawdown followed at a later stage by annuitisation (of at least some of the pension pot). This offers a combination of short-term flexibility and long-term certainty and longevity hedging. What it doesn’t do, however, is blend the two in a way that ensures the drawdown investment stage doesn’t undermine the ability to provide certainty later in life.

“This is why the focus now is on drawdown investment strategies that counter the various risks faced by investors in drawdown, not least sequence risk, pound-cost ravaging and inflation.”

Striking the balance of middle-ground offerings has proven tricky for providers, with the likes of Metlife and Aegon having ditched their offerings while Royal London and Old Mutual have both stepped back from plans to provide a product.

Share icon
Share this article: