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L&G: Scrap advice requirement for GARs


Legal and General has called on the Government and FCA to weaken the new advice requirements for people accessing their pension pots to help ease customer frustration.

In March the regulator announced a radical overhaul of pension transfer rules, including requiring people to see a pension transfer specialist when transferring out of schemes with “safeguarded benefits”.

In addition, people in defined contribution pensions with embedded guaranteed annuity rates are now required to take advice before transferring out of schemes.

But L&G pensions strategy director Adrian Boulding says rules around GARs are one of the main blockages frustrating customers trying to use the new pension freedoms.

He says: “It’s a Government requirement that if you have more than £30,000 in a policy with a guaranteed annuity rate that you have to take financial advice – that’s the blockage.

“The Government should review that requirement and replace it with a different rule so that the ceding pension scheme is instead required to inform customers that they have a GAR and suggest they might like to take financial advice.

“At the moment we have a situation where the law says you must take advice, the individual doesn’t want to and is certain they will not follow the advice anyway, and advisers are not keen to pick up this business, and I don’t blame them.”

Earlier today, the Treasury announced a consultation on addressing “excessive” exit fees and delays in transferring between providers.


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There are 8 comments at the moment, we would love to hear your opinion too.

  1. “The Government should review that requirement and replace it with a different rule so that the ceding pension scheme is instead required to inform customers that they have a GAR and suggest they might like to take financial advice.”

    Perhaps the rule should be stronger than this: ie that the ceding pension scheme should inform customers that it is highly likely to be against their best long-term interests to cash in their with-GAR pension, and also give examples comparing current annuity rates with the guaranteed ones on offer? After all, the nominal cash-in value of a GAR personal pension is a fraction of its true income-purchasing value.

  2. So a provider with expensive GARs is happy for people to dump them and take their funds without advice. Call me cynical!

  3. And will L&G pick up any compensation tab down the line?

  4. The main blockage we’re finding is providers taking significant lengths of time to issue, what should be, simple paperwork…. if a critical path was measured in giving advice the issuing of paperwork (accurate paperwork!) is the main delay in the vast majority of our work.

  5. Shame Ed Millaband has gone….he really could have called this an “omnishambles”

  6. Trevor Goodbun 17th June 2015 at 5:02 pm

    Jarrod, having just looked at a case this morning with a GAR of nearly 13% at 65 I am cynical too!

  7. @JarrodEllis Hi Jarrod, good to see you on this forum. I am certain that providers are happy for GARs to be ignored, I had a case with a major insurer whereby if I gave advice and took a fee the GARs were lost, if the client settled direct non advised he kept the GARs. One of their own salespeople tried to sell him a standard annuity and take a fee, disgraceful.

    Because they screwed up I had to help him with the paperwork, they tried to infer that advice had been given and he would need an advised quote instead. Anything to not pay out, and at the risk of being sued, I would suggest that internally staff are being encouraged to keep quiet about GARs, I only found out by accident when I ordered the wrong retirement quote in this case.

  8. I am sure there are many people like me that have a compelling reason to transfer out of my old company scheme, that being that I don’t have a wife to benefit from the death benefit but I want to make sure my kids inherit the funds. There should be a form that I can sign stating that I understand the risks but wish to do it anyway, I don’t want to pay £2,500 for a letter that just confirms what I already know.

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