When advising on income drawdown, there has been a shift away from a fixed rate method with more advisers now preferring modelling tools.

Over a third (38%) of financial advisers surveyed by Aegon said they prefer using modelling tools when advising on safe income drawdown withdrawal rates, an increase from 28% over last year.

The advisers surveyed said they have relied more on modelling tools over the last year to illustrate portfolios and analyse scenarios after the markets fell sharply at the end of Q1 2020.

Use of fixed rate or range method fell from 41% to 37% over the last year. Where it was used, there was a big increase in using a rate of less than 4% (32% compared to 21% a year ago).

Other methods, such as basing income on annuity rates or simply taking portfolio income, have also fallen in popularity, with advisers citing the continuing challenging interest rate environment.

The research also shows a continued move to using drip-feed drawdown, meaning some individuals are taking less of their tax-free cash immediately at retirement, although the picture is mixed.

The majority of advisers surveyed (79%) said drip feed drawdown in the main reason for clients taking less of their tax-free lump sum immediately at retirement.

Steven Cameron, pensions director at Aegon, said: “The research shows advisers are split on whether people have taken more or less tax-free cash at the point of retirement over the last few years but where they have taken less, use of drip-feed drawdown was the driving force.”

Aegon carried out research with 212 financial advisers in partnership with Next Wealth between 3 and 11 December 2020.