Advisers 'shifting away' from fastened fee drawdown 

Analysis of the adviser market has proven a pointy rise within the quantity utilizing earnings drawdown modelling instruments, with over half (51%) utilizing the instruments in comparison with 38% final 12 months.

The analysis revealed a seamless decline in use of the fastened fee methodology, with solely 1 / 4 (26%) of advisers utilizing this methodology (usually a 4% withdrawal), down from 37% the earlier 12 months and 66% in 2018.

The place a set fee is getting used, the analysis for Aegon UK discovered a rise within the charges usually used, following a fall in the course of the first 12 months of the pandemic.

Advisers highlighted the challenges in delivering minimal earnings necessities amid macro-economic uncertainty and market volatility.


Since 2018, Aegon and Subsequent Wealth have tracked the strategies advisers use to find out a ‘secure’ withdrawal fee from a pension pot. Over this era, Aegon says there was a major shift from the fastened fee methodology (such because the ‘4% rule’) in direction of modelling instruments. 

In 2018, some 66% of advisers mentioned they use the fastened fee, or a set vary, to find out a sustainable withdrawal fee. Nevertheless, the most recent analysis reveals this has fallen to solely  26%. 

On the similar time, modelling instruments have grown “vastly” in recognition, Aegon discovered. In 2018, simply 13% of advisers mentioned they use modelling instruments to find out a secure withdrawal fee. Within the newest analysis this had elevated to 51% of advisers. 

Whereas the proportion of advisers utilizing a set fee has fallen 12 months on 12 months, the place it's getting used the analysis reveals a rise within the charges usually used in comparison with the primary 12 months of the pandemic. Whereas no advisers have been suggesting charges a lot above 5%, use of a fee above 4% had risen to 27% in comparison with 12% the earlier 12 months.  

Official information confirmed these taking versatile withdrawals from their pension exercised restraint in the course of the early levels of the pandemic. Nevertheless, the rise within the fastened charges used suggests some shoppers need to draw down the next earnings publish pandemic. Aegon says there is also a need to maintain tempo with rising costs.

Steven Cameron, pensions director at Aegon, mentioned: “Our analysis reveals there was an enormous shift within the strategies advisers use to find out a ‘secure’ earnings drawdown fee in retirement in recent times. Modelling instruments overtook the fastened fee methodology for the primary time following the onset of the pandemic and the most recent analysis reveals there was an extra widening of this hole. The numerous macro-economic instability and market volatility over the past two years could have performed a component on this, as modelling instruments facilitate a extra dynamic strategy to managing retirement earnings. 

“With the cost-of-living disaster taking maintain, some individuals would possibly look to attract down the next earnings from their pension to compensate for rising costs. Nevertheless, this carries the danger of depleting funds sooner than deliberate, significantly throughout a interval of market volatility, so you will need to search recommendation earlier than making vital choices that would have lasting affect. The analysis reveals advisers are already updating their instruments and assumption to cope with larger uncertainty and adjustments in spending behaviours.”

• Aegon analysis with Subsequent Wealth was carried out in December 2021 with 212 monetary advisers and supplemented with in-depth interviews. 

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