Pension providers are expecting a huge surge in the number of customers opting for easy-access drawdown next year.
Standard Life, Britain’s biggest drawdown provider fears thousands of new customers wanting to take cash from their pensions will over run the company’s online portal and call centres.
Around 6% of retirees put their pensions into drawdown currently, but this is expected to soar to 30% from April 2015, when the new rules come into effect.
The main worry for the firm is that in coming years, more and more customers will go into drawdown, swamping their capacity to service their demands.
Standard Life deals with 2,000 new drawdown customers a year at present.
Capacity crunch
The forecast for next year is an extra 8,000 customers taking the total to 10,000.
By 2016, the number is expected to swell to 20,000, and to jump by another 10,000 to 30,000 by 2017.
As a result of this massive increase in drawdown customers, the firm is redesigning and upgrading online drawdown payment portals.
Standard Life is not the only company in this predicament. Most major pension providers are drafting blueprints to scale up their operations to deal with as many as 200,000 new drawdown customers each year.
“Our concern is that many drawdown platforms will reach a capacity crunch very quickly,” said the firm’s Alastair Black.
“Every year, not only do we have to manage the previous year’s customers but another new influx and our systems are not designed to cope with this level of service, and neither are the systems of any other pension drawdown company.
Smooth running
“Until now, drawdown has very much been a niche product, but now it’s going to become a mainstream offering almost overnight.”
Black explained the extra volume of customers will stretch the firm’s drawdown platform to the limit.
“In line with many other firms, we are allocating significant resources to prepare our systems in time,” he said.
“Preparing a pension for drawdown involves more work than setting up an annuity as customers want to invest their assets and complicated arrangements need to be managed.
“Other issues are involved to ensure the smooth running of the system. Tax is one of them. Effectively the drawdown system will also manage tax for many customers as we have to calculate and deduct the right amount of tax at source.”
The company already administers around 50,000 pensions and pays out around £600 million in benefits each year.
