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 currently use 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, Yorkshire Building Society, Leeds Building Society, Dudley, Tipton and Cosely, and Leek United Building Society offer the product through a single-tie arrangement with the provider.
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 unbiased.co.uk.
A 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: “L&G is providing our RDR pensions solution and we will be working with it to produce an appropriate range of products that best suit our members’ needs.”
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: “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 expect to have a solution in place early next year.”
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.”