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Icob confusion over pension term sales

Direct Life & Pensions sales and marketing director Richard Verdin says Icob advisers selling pension term assurance are creating confusion among consumers because they are not regulated to advise on the suitability of the product.

Verdin says Icob advisers are not regulated to give advice on pensions and as PTA is classed as a pension product, they cannot advise on its suitability.

He says he is concerned about whether consumers are aware that they may not have recourse to the Financial Ombudsman Service if the product later turns out to be unsuitable.

Verdin says there is also a risk that consumers who have opted for enhanced protection on their pension funds could lose this if they are sold PTA without advice. If consumers exceed the lifetime allowance of 1.5m, they will have to pay a 55 per cent tax charge on any savings above this threshold.

He says: “For the sake of saving a few pounds a month on life cover, consumers could lose thousands of pounds when they reach retirement age. This is going to blow up in everyone’s faces. We think the FSA has messed up here and it is a massive area of potential confusion to consumers.”

However, Lifesearch head of protection strategy Kevin Carr says most Icob advisers will have checks in place to ensure that this does not happen.

He says: “We have a caveat which states that the product may become unsuitable but 98 per cent of people would not have any issue with a PTA product.

“It is feasible that some Icob advisers may not be properly explaining that it could impact on a consumer’s pension but this highlights the importance of having the switch option in place so if it becomes unsuitable, they can just switch out.”


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