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Building societies face RDR pensions delay

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The majority of building societies will not be able to offer pensions on an adviser charging basis at the beginning of next year because the Legal & General product they offer does not facilitate it.

From 31 December, commission will be banned on all advised pension sales. As a result, advisers will need to charge for their services either through an upfront fee or an adviser charge, which is taken from the product.

L&G has confirmed the L&G (UTM) Stakeholder Pension Plan will not be able to facilitate adviser charging, meaning that in order to complete an advised sale of the product a firm would need to charge an upfront fee under RDR rules.

Nationwide says it has suspended pension sales until an alternative product which facilitates adviser charging can be put in place. In the interim, the building society will refer pension customers to

Yorkshire Building Society, Leeds Building Society, Dudley, Tipton and Cosely, and Leek United Building Society also offer the product through a single-tie arrangement with the provider.

A Yorkshire Building Society spokesman says: “We have been assured that L&G expect to have a pension product in place during early 2013. In the interim L&G will be able to offer advice on pension planning with customers able to go elsewhere to seek the product they require.”

Virgin Money says it offers the L&G product alongside its own RDR-compliant stakeholder pension which does facilitate adviser charging. It has suspended sales of the L&G plan.

A Legal & General spokesman says these deals cover 87 per cent of the building society market.

He says: “Our existing stakeholder product does not facilitate adviser charging and building societies’ business models are based on taking an adviser charge because most customers will not be willing to pay an upfront fee.

“We have the Portfolio Plus Pension but that does not facilitate adviser charging at the moment.

“We expect to have a solution in place early next year.”

A Nationwide spokesman says: “We are withdrawing from offering pension advice for the moment because the L&G product we currently offer does not facilitate adviser charging.

“We are doing some further research and analysis of customer needs before we commit to launching a pension product. We hope to have something in place for early 2013.”

Leeds Building Society head of corporate communications Gary Brook says: “We will be working with L&G to produce an appropriate range of products that best suit our members’ needs.”

Yellowtail Financial Planning managing director Dennis Hall says: “This will damage L&G’s profitability and credibility. It seems to me an incredible oversight not to have an RDR ready product in place for building societies for 1 January 2013.”


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. So In March client goes in to a bank or a building society as they have earnings of £50,000 and a lump sum of £50,000 to invest and NWide advise a single premium in to a mixture of an ISA and OEIC and an insurance company bond. The client mentions they would also like some advice on saving for their retirement and so refers them to an IFA via unbiased website.
    The client walks in and sees the IFA on 10th april )new tax year) having taken early retirement on 6th April, so now has NO NREs so the IFA says, if you’d asked me for advice last month, I would have reccomended a pension. Now you have no NREs, there are no advntages of the pension. The client then asks, “why didn’t the bank/bs tell me that?” Could it be becuase they were not advising on pensions perhaps?
    This is ALREADY happening with the bancussrers, even when they HAVE pensions available for client and our client complaiend to the FOS as a result. Case handler has decliend and we are now awaiting a respone from an actual ombudsman. If it is declined, then it will basically mean RU64 does not apply, despite the fact it still does according to the FSA’s own rule book.

  2. It’s sad to see so many institutions that can only ‘sell’ L&G pensions to those seeking pension advice.

    It beggars belief that an organisation like Nationwide feel that the L&G solution suits everyone… I wonder how many clients are 100% clear that, if a pension is to be used, the adviser can only use L&G – irrespective of the client’s needs, aims and objectives.

    I hope that RDR highlights this to clients as it would be assumed that clients will ask more questions when they are seeing a direct cost relating to the advice they receive.

    Alternatively, it wouldn’t surprise me if they are pushed down the ‘execution only’ route so that commission could still be paid.

    Maybe I’m a cynic.

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