The Government plans to review the advice requirements surrounding pension freedoms amid concerns over the way providers are applying the rules and insistent clients.
Under rules introduced alongside the reforms in April, savers with safeguarded benefits worth £30,000 or more are required to seek advice before transferring their pot. Safeguarded benefits include funded defined benefit rights and plans with guaranteed annuity rates.
In June Money Marketing revealed providers are adopting different stances on when advice is necessary, with only some making advice a requirement for entering income drawdown. There has also been widespread confusion about whether the value of the GAR should be included when calculating a saver’s benefits.
In addition, some providers are forcing savers to take advice when transferring from old to more modern schemes.
A Treasury consultation on pension transfers and early exit charges, published this morning, says the industry and individuals have warned there is “insufficient clarity” about when people need to take advice before transferring.
It says: “In some cases, it is clear that consumers are frustrated by existing legislative and regulatory requirements to seek financial advice in certain circumstances – although it is worth noting that there is no requirement in legislation to follow the advice taken.
“There are also reports of some firms requiring people with benefits worth below £30,000 to take advice, and there may also be cases where firms are requiring advice when not required to do so under pensions legislation, for example if an individual already has flexible benefits and opts for a drawdown product.”
The Treasury also says it is “aware” of concerns around insistent clients, but says FCA rules are clear that: “There is no rule to prevent advisers from transacting business against their advice if the client insists.”
It adds: “The Government appreciates that industry and consumers may still be unclear on specific circumstances when independent financial advice is required and wants to understand whether the process for ensuring individuals understand the need for and importance of independent financial advice is operating as intended.”