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Catch up with the latest press releases from LV=

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LV= urges Advisers to revisit drawdown clients before April

Press release: 10/02/2011

  • Opportunity to lock clients into a higher income limit for five years through a member nominated review (MNR)
  • LV= to waive £60 transaction charge for drawdown clients requesting an MNR

Retirement specialist LV= is calling for advisers to review their existing drawdown clients whose plans hit their anniversary before 6 April 2011. Following the legislative changes linked with the removal of compulsory annuitisation at age 75, the maximum income limit for drawdown customers will drop from 120% to 100% of GAD in April. But if advisers act quickly clients could lock into the higher rate of income for up to five years, by electing a member nominated review (MNR).

An MNR is available to clients on the anniversary of the pension fund first being invested into an unsecured pension (USP), and could mean a client is able to manage the potential reduction in drawdown income over a five year period, versus simply seeing their income decrease significantly at their next scheduled review. LV= has over 1,200 drawdown clients with an anniversary date in February or March 2011 who could benefit from this opportunity and estimates that between 15% to 20% of all drawdown customers across the market could be in a similar position.

LV= is supporting advisers by proactively contacting them if they have clients that could qualify for an MNR. LV= is also waiving the £60 transaction charge that would normally apply for drawdown customers requesting an MNR, and providing advisers with draft letters and technical support to ensure this opportunity is not missed. Advisers can use an online tool at to find out if it is in their clients’ interest to elect an MNR.

Ray Chinn, LV= head of pensions, commented: "This window of opportunity is driven by legislative change rather than consumer or adviser demand, so we want to make sure advisers are made aware which clients could benefit from electing an MNR. It is important to act quickly if an MNR is applicable. In terms of charges, we are waiving the MNR charge so that customers are not disadvantaged by the proposed change in legislation and we would urge other providers to do the same. We suggest that all advisers revisit existing drawdown client files and urgently get in touch with the respective providers to understand what options are open to them."

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Member Nominated Review Background

  • From 6 April 2011 for new cases the limits are being reduced to 100% of the GAD rate (previously 120%) and the review period is being reduced to every 3 years.

  • Clients that are already in drawdown will transition across to the new rates over a period of the next five years. The actual date they move onto the new rates depends on a number of factors:

    • The date of their last GAD review (pre April 2011) or

    • The date that they reach 75 (if applicable) or

    • The date that they transfer to another scheme (in they do so before transitioning onto the new rates).

  • Reviews of income are currently undertaken on a 5 yearly basis, taking account of their fund value and the prevailing GAD rate for their age at the time of the review. The 5 yearly review is designed to ensure that clients retain an adequate income and are unlikely to extinguish their retirement fund.

  • Clients have the option to ask for a Member Nominated Review and that option will remain available from April 2011. MNRs are only permitted on an anniversary of their plan date – that is when the pension funds first went into USP. For a MNR to take place it needs the agreement of the pension scheme but this is not an issue with LV= as we are there to help our members and their advisers.

  • The pension regime is being changed from 6 April 2011 with USP being replaced by capped and flexible drawdown.

The information above is based on our understanding of the draft legislation as at 9 February 2011, and current legislation applicable in England & Wales, and HM Revenue & Customs practice, which is subject to change. The draft legislation is due to take effect from 6th April 2011. However until it becomes law it may be subject to change.

About LV=

LV= is a registered trademark of Liverpool Victoria Friendly Society Limited (LVFS) and a trading style of the Liverpool Victoria group of companies.

LV= employs around 4,000 people, serves over four million customers and members, and manages around £7.9bn (as at 30 September 2010) on their behalf, via LV= Asset Management (LVAM). We are also the UK's largest friendly society and a leading mutual financial services provider.

LVFS is authorised and regulated by the Financial Services Authority, register number 110035. LVFS is a member of the ABI, the AFM and ILAG. Registered address: County Gates, Bournemouth BH1 2NF.