Providers have started to receive calls from clients wishing to cancel their request to withdraw tax free cash from their pension, after pre-Budget rumours did not come true.
In a note to advisers, seen by FT Adviser, Abrdn said it had started to receive calls from people wishing to exercise their so-called cancellation rights in respect of any tax free cash and income payments made from their pension.
It revealed some advisers and clients were choosing to return the cash and income taken in order to protect the tax favourable status.
Drawdown investors can typically cancel their withdrawal request within 30 days of first drawing from their pension under rules implemented by the FCA following the introduction of pension freedoms.
Before the Autumn Budget, rumours had swirled that chancellor Rachel Reeves could reduce the level of tax-free cash available from the current 25 per cent of the pension pot, or reduce the maximum amount from its current £268,275.
This led to people panicking and accessing their tax-free cash before any solid decisions were announced.
Now they are looking to undo their actions.
William Burrows, financial adviser at Eadon & Co, said: “My view is that a number of experienced advisers like myself advised clients not to panic into taking tax-free cash unless they were going to in the near future, but clearly a lot of people panicked and are now having buyer's remorse, especially those who took tax-free cash at early ages.
“The lesson for the future must be not to rush into decisions on market rumours.”
Cancellation rights exist to allow drawdown customers to review their decisions after first dipping into their pots.
Abrdn has now made the decision to accept cancellation on some other of its products too.
It stated: “While the purpose of the cancellation rights is strictly for the purposes of customers reviewing their decisions on first moves into drawdown, we have taken the decision to accept cancellation requests temporarily also for first moves to drawdown from clients who have a Wrap Sipp or an Elevate PIA on our platforms and who were in drawdown prior to a transfer to the Elevate PIA or Wrap Sipp."
It stated it would update advisers when this position changes.
Drawdown clients who had already started to draw from their pensions before do not have automatic rights of cancellation, it added.
amy.austin@ft.com
