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Call for clarity on freedoms advice requirement for ‘trivial guarantees’

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People with “trivial guarantees” are being forced to take advice by providers worried about falling foul of FCA rules.

Advice is required for transfers where guarantees are involved and worth £30,000 or more.

In June the Department for Work and Pensions confirmed when benefits include a guaranteed annuity rate the calculation of the value of benefits must take into account the value of the GAR.

But independent pensions expert Alan Higham says there are cases where people with “trivial benefits” are being forced to take advice.

He says: “The intention was for people with valuable guarantees to take advice because of the risk of losing money.

“The legislation should not have been drafted in a way that means people with trivial guarantees are also caught.”

Higham says in one case a saver with a guaranteed pension – but not a GAR – of £600 a year was required to take advice because the value of the entire pot was £40,000.

He says: “By extension, if every provider just decided to give away a £1 a year guaranteed pension it would appear the existence of a trivial guarantee means you would need advice to move a pot. The rules are not clear enough here.”

Talbot and Muir head of technical support Claire Trott says: “We’ve had situations where the pot is smaller than £30,000 but the guarantee is worth more. It’s a grey area.”

A DWP spokeswoman says: “We have recognised that provision of advice and guidance could in some circumstances work better. That’s why we’re working with the Treasury and FCA on the Financial Advice Market Review.”


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