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Govt to launch consultation over GARs advice confusion

Ros Altmann

The Government will launch a consultation to address confusion around when advice is required for people with guaranteed annuity rates who want to access their pension pot.

Under rules introduced following the introduction of the pension freedoms in April, the Government mandated that savers with safeguarded benefits worth more than £30,000 get regulated advice before taking their pot as cash. This includes those with GARs attached to their policies.

However, in June Money Marketing revealed widespread confusion among providers about how GARs should be valued when assessing whether or not a customer is required to take advice.

Addressing the National Association of Pension Funds conference in Manchester today, pensions minister Baroness Ros Altmann said: “I am going to be launching a consultation in the autumn for simplifying the valuation of guaranteed annuity rates to clarify for providers and customers who it is that needs to take financial advice.

“We will [also] be gathering evidence on what is happening to people overseas who might be required to take advice.”

Altmann also said the Government “can’t be complacent” about the success of automatic enrolment as almost two million small firms have yet to reach their staging date.

However, she played down the prospect of raising the minimum contribution level during this Parliament. Once the reforms are fully rolled out in 2018 the minimum employer contribution will be 3 per cent, with employees putting in 4 per cent.

Altmann said: “We all know there is a need to increase contribution rates because the rates right now are inadequate for providing a decent amount of pension.

“However, we have just started on this process of getting employers in. More than 95 per cent haven’t even started yet.

“If we start talking about huge increases in contributions before they get comfortable with the current programme, then I think we would be shooting ourselves in the foot.”

Earlier today the pensions minister confirmed plans to introduce an automatic transfer system for small pots and to amend rules so employers can offer so-called ‘Defined Ambition’ pensions have been shelved.

Altmann insisted both reforms will need to be pursued in the future, although she did not set out a timescale for their introduction.


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

  1. The providers want clients to access their pension funds with GAR’s without advice and subsequently lose the valuable GAR’s.
    Ive two GAR cases at the moment where the GAR is 11% , ok no widows etc, but put a bit term assurance in place to act as a guarantee period and happy days for client and unhappy for the providers

  2. Providers are not looking to encourage clients to encash and lose GARs, rather the opposite. I have seen many examples of provider literature where a GAR is in place and without exception the client is warned about the GAR and if they contact the provider, again they are warned about losing this and if benefits exceed £30k are rightly signposted to an adviser.

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