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LV= calls for £25 ‘polluter pays’ levy to sustain Pension Wise

LV= wants a £25 charge to be levied on insurers for every existing customer who takes out an annuity to help fund the cost of the Government guidance service Pension Wise.

The charge would exclude savers who choose enhanced annuities or alternative products, but LV= estimates that the charge would catch 60,000 annuities per year, creating an additional £1.5m in funding.

LV= managing director of retirement services John Perks compares the charge to a “polluter pays” levy, forcing firms to foot the bill for negative market conditions they create.

He says: “There is a need to secure the long-term and sustainable funding of Pension Wise, and we believe this needs to be linked to consumer outcomes and industry behaviour.”

Perks acknowledges the charge would include savers opting to retain their provider even after receiving advice, but argues this would be mitigates by the benefits of a simple levy.

He says: “I’m not saying that everyone that internally invests is going to get a bad deal, but there is agreement that is probably going to be the area where people might get a worse outcome.

“Providers will argue that people who stay with them are getting good deals. But those are the same arguments that that have been used for years and created the situation where consumers aren’t aware of what is going to happen.”

The plans come just under three months after an FCA review of the annuities market found examples of pensions providers “actively” ignoring shopping around principles included in a code of conduct drafted by the Association of British Insurers. 

Current FCA rules require providers to highlight Pension Wise, as well as the possibility of regulated advice.

However, LV= is demanding the regulator goes further, and bans pensions providers marketing retirement products to customers until they have confirmed the have used Pensions Wise, sought regulated advice, or have actively chosen to take neither option. 

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. I have a better idea. Charge the customer who takes the annuity not the pension not the provider. Especially if they have taken Pensionwise guidance beforehand. Better still charge them if they take the lot under the new rules. Make them pay a little for the service provided

  2. Call a spade... 4th March 2015 at 2:04 pm

    @Marty
    Those who take the lot will already be charged – they’ll be taxed. And what about people with very small pots that aren’t worth the costs of drawdown?

    Pension freedom is about letting people make their own choice, even if it’s a bad one – not punishing them for making a choice that someone else thinks is wrong. Surely it would be better not to have so much freedom in the first place, or to enforce advice, than to engineer outcomes through spurious charges.

  3. I am not sure why those who go down what can be considered the lowest risk route should pay a levy?

    Surely it should be those that use the new flexibilities that have resulted in the need for this guidance service?

  4. @ call a spade. It was not my intent to come across as if i would like to punish them. I was trying to point out that it should be the individual who pays to receive the benefit, not the industry footing the bill all the time.

  5. When a lot of these plans were arranged the consumer believed the insurers staff would advise them on how best to draw their income with them (not OMO), bt there would have been a staff time cost built in at the time. One could argue that as previously commission would have been paid (and is for non advised!) that the provider should pay a nominal amount to cover PensionWise costs. 25 quid is really not enough. More like 150 to 200 for non advised guidance I would have said.

  6. I thought the government said that they “trust” people with their pension pots?

    Why then do they feel that there is a need for guidance, lines of defence or indeed advice?

    Surely if they do trust people all of this is unnecessary?

  7. I think LV= and other providers would be better putting their influence behind highlighting the nonsense that underpins the funding of such bodies and highlighting the way in which this government is exploiting our industry for their own greater good (the use of fines to shore up the defence budget and compulsory levies for what should be taxpayer-funded organisations being just two examples).

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