BlackRock launches low-cost thru-retirement drawdown plan

BlackRock has launched a drawdown option to offer pension scheme members an income alternative to annuities.

Called Retirement Income Account, the solution aims to provide a low-cost and straightforward option for retirees in schemes managed by BlackRock, allowing the account holder to select an unlimited number of regular or ad-hoc income payments. The firm has already accepted its first account holder.

Payments are made by selling units in the funds held by the account holder and drawing down capital over time. By remaining invested, account holders can vary income to suit their needs while retaining the potential for future capital growth.

The service will initially be available to BlackRock workplace pension clients and their scheme members approaching retirement. Account holders will be able to access a multi-asset core fund, LifePath Flexi, or create their own personal portfolio from a range of around 100 investment funds from BlackRock and other leading managers. There are no set up, transaction, or exit fees, and if the account holder wishes to stay in the same investment fund or funds, there is no charge for transitioning their account from their workplace scheme to the BlackRock Retirement Income Account. Investors opting for the LifePath Flexi fund pay an annual management charge of 0.41 per cent that includes account administration and fund charges.  

According to BlackRock research, 13 per cent of 55-74 year olds, who are not fully retired, intend to stay invested in their pension plan and take annual withdrawals to minimize their tax liability.  However, 28 per cent indicated they were undecided about what to do after new pensions freedoms were introduced.

The launch follows BlackRock’s recent unveiling of a new range of target-date funds for those saving towards retirement. Its LifePath Retirement funds are designed for those planning to buy an annuity at their retirement date, while LifePath Capital funds are for members planning to take DC funds as a cash lump sum and LifePath Flexi funds are for members who are unsure how they will access their pension savings, or already know they will want to leave their DC fund invested and draw down income from it.

Mr. Bucksey added, “The new pensions freedoms have broken the shackles of traditional annuities and we think this new service is a leap forward for our members. We have also increased the guidance and support available from BlackRock, both online and by telephone, with a new modelling tool, and promotion of the Government’s Pension Wise initiative, as well as emphasis on the need for individuals to consider financial advice to make the right choice.”

BlackRock head of UK defined contribution Paul Bucksey says: “We have seen a raft of new fund launches within the industry to cater to new pensions freedoms, but we believe this innovation provides our members with a simple, flexible and cost-effective way of moving from the accumulation phase of workplace pension saving to decumulation.”