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Abandoned clients add to concerns over drawdown

IFAs and product providers fear income-drawdown policies could be plunged into fresh controversy over so-called “orphan plans”.

Orphan income-drawdown policies are cases where an adviser takes the maximum up-front commission and then goes out of business, leaving the policyholder with no one to turn to for advice.

With no further commission available for ongoing advice, other IFAs are reluctant to take on the client unless they are prepared to pay a fee.

This leaves the policyholder effectively managing their own plan.

The latest concerns follow industry calls in Money Marketing for an FSA review into sales of income-drawdown policies. Specialists fear that non-specialist IFAs are recommending the products bec-ause of the high up-front commission available.

The PIA ombudsman service this week added to the widespread concern by revealing that it is receiving an average of a complaint every month about pension fund withdrawal products.

Intelligent Pensions director Steve Patterson says: “There could be thousands of income-drawdown policyholders who need ongoing expertise and advice but have nowhere to turn because their financial adviser took high up-front commission.

“We have come across a number of life offices with serious concerns over orphan policies with no servicing commission.”


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