BlackRock enters UK pension drawdown market

BlackRock, the world's largest asset manager, has launched into the UK drawdown market with a product aimed at giving savers a low-cost option for taking their retirement income.

The US-based business, which has $4.7tr of assets under management, has launched a "Retirement Income Account" which allows savers to keep their pension pot invested.

Until now, BlackRock has only offered pensioners traditional mutual funds, investment trust and exchange traded funds. Its expansion into the UK drawdown market is in direct response to the pension freedoms which came into force this month.

"The new pension freedoms have broken the shackles of traditional annuities and we are trying to create straightforward investment options for account holders to get the income they need," said Paul Bucksey, BlackRock head of UK defined contribution.

Investors in BlackRock's drawdown account must have a minimum fund size of £50,000 and will have a choice of both BlackRock and external funds. Annual management charges on its core fund are 0.41 per cent.

The BlackRock product is initially only available to the 300,000 or so members of workplace pension schemes managed by BlackRock. In total the company manages about £320bn of pension assets in the UK.

"The bigger prize, in due course, would be the wider market," said Mr Bucksey. "We will keep this under review."

Market observers said that with charges of less than 0.5 per cent, BlackRock could shake up the market.

"It's good to see BlackRock offering a competitive drawdown pension in the workplace with the hope it may filter through to the wider market," said Justin Modray, founder of Candid Financial Advice.

"The 0.41 per cent all-in annual charge is competitive and pretty similar to using a tracker fund via the Fidelity pension, which is already proving popular in the greater marketplace."

Mr Modray said that Fidelity charges 0.35 per cent for a drawdown pension and 0.07 per cent for a UK tracker fund. "However, percentage annual fees can become excessive on larger pensions," he added.

The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.

Last year, AllianceBernstein, the US asset manager, launched a drawdown product aimed at giving alternatives for UK workplace pension savers.

"New players in the income drawdown market could be good news for consumers if it means the development of better products suitable for the mass market," said Richard Lloyd, executive director of Which?, the consumer campaigning group.

"We've called on the next government to introduce a cap on products sold by a customer's existing provider, and establish a low-cost, state-backed drawdown provider if the industry does not step up its game."

Other experts said savers needed to understand the risks of drawdown, where money is left exposed to the market.

"Even with low charges, consumers need to understand that income drawdown involves the risk of running out of money due to poor investment performance or excessive withdrawals," said Dominic Lindley, an independent consultant on consumer issues.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation