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Major providers refuse to offer pensions advice allowance

Firms say they back the idea of the advice allowance but point to poor take-up, including among advisers

Advice advisers eraser

A number of major pension providers are not offering their customers access to the pensions advice allowance, citing poor demand from both advisers and clients.

The pensions advice allowance was introduced on 6 April to allow consumers to access up to £1,500 early from their pension pots to pay for advice.

Consumers can access £500 a time in three separate tax years, which can be put towards robo or face-to-face retirement advice, but not towards non-retirement advice such as inheritance tax planning.

Providers are not obliged to offer the allowance, which was one of the first proposals to be formally progressed from the Financial Advice Market Review.

The Financial Times reports firms including Aviva, Aegon, Fidelity, Legal & General, Prudential and Royal London are all not offering the allowance.

Pru told the newspaper it backed the allowance, and had investigated whether to make it available to customers.

But it says: “Because there has been minimal demand from consumers, and the pensions advice allowance is complicated to administer, we have decided not to introduce a facility to use the allowance at this time.”

Aviva says customers can use its existing adviser charging system to pay for advice, but says some will need to transfer to another product that facilitates adviser charging.

Aegon also says it supports the principle of the allowance, but it was “failing to take off” with customers and advisers.

Providers who offer the allowance include Standard Life, Hargreaves Lansdown and LV=.

The Treasury says: “Providers now have the tools they need to help consumers use this allowance and support them to make the best financial decisions for later in life.

“We want to help people understand their pensions so they can plan for a comfortable retirement.”

Personal Finance Society chief executive Keith Richards has called for the allowance to be actively promoted, to “send a signal about the importance of advice more widely.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. As has been suggested by others, the reason for low demand (so far) is probably simple consumer ignorance. What people just don’t know about, they’re not going to ask for, are they?

    That could be addressed by a regulatory directive on providers to make prominent mention of it in their pre-retirement packs. If their systems are such that they cannot facilitate partial withdrawals prior to full vesting, they should be required to pay it as an advance and mark it as a debt against the eventual policy proceeds. If demand still remains virtually non-existent, it’s unlikely to cost them much, is it?

    However much it tries to pretend otherwise, the FCA is a subsidiary of the Treasury and therefore has a responsibility to find ways to kick-start this government initiative. How difficult can it be?

  2. Robert Milligan 31st July 2017 at 11:00 am

    The problem is that Past policy’s can not offer Adviser Charging and most contain Benefits which are protected, So most Providers are simply saying “Not From That Contract” These contracts mostly suffer from Exit Charges so are being left alone. Same old situation, the Government who made this simple allowance failed to understand the implications and the Industry restrictions and Industry abuse of retaining closed companies for the profit made from old contracts, Abbey Life!! now having been sold for the umpteen time

    • Julian Stevens 31st July 2017 at 4:34 pm

      Two points:-

      1. As I’ve written above, there is a way round old systems that cannot accommodate partial withdrawals prior to full vesting. The FCA could simply say to these providers: Update your systems or you’ll have to advance the allowance from other sources and reclaim it later.

      2. To its credit, the FCA has applied pressure to providers to minimise or even eliminate altogether punitive charges for early vesting.

  3. This initiative really does need political intervention to kick-start it. There is no way that an adviser business model can be constructed incorporating this useful facility in the knowledge that providers cannot be bothered to offer it. For “there`s no demand” read “frankly,it`s too much trouble”.

  4. Paolo Buco nel Terreno 31st July 2017 at 4:28 pm

    Who’s money is this again??

    The Treasury and FCA need to make this a mandatory requirement of these firms otherwise the FAMR is a useless piece of work!!

  5. We can already take agreed fees form the policy if agreed by the client. So, why should these companies incur additional cost and work? The policies that cannot facilitate the above fee (old contracts), also would not be able to facilitate the government payment. The end result is the same, but the knowledge this is available as a payment method does need to be marketed by the regulator and Government.

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