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MM leader: The broken model of pension freedoms advice

Natalie Holt website

The concept of pension freedoms is slowly unravelling. At the very least, the reality is beginning to dawn for savers that “flexible” pension pot access is not quite what George Osborne made it out to be. Caveat upon caveat has been heaped on the easy promises made by the Chancellor last year. Pension Wise, second line of defence, the advice requirement for benefits worth more than £30,000, the inclusion of guaranteed annuity rates, and so on.

These measures are a crude attempt to paper over the cracks of a hastily cobbled together timetable for pension freedoms, for which the financial services industry as a whole is now paying the price.

With savers being passed from pillar to post when it comes to accessing their cash, seemingly frustrated at every turn, it is no wonder tensions are running high.

Providers are mounting the offensive, with the Association of British Insurers and some of its individual members calling for savers with GARs to go through Pension Wise rather than an adviser.

Insurers do not like being painted as the bad guy, and they argue their proposal would ensure the so-called “barriers” to pension freedoms would be lifted. But as several advisers have already pointed out, it would also mean providers would no longer have to stomach the cost burden that goes alongside providing a GAR.

Advice on cashing in a pension pot has been made mandatory to a large extent, and yet providers say they are hampered by the need to redirect customer enquiries. Some savers are adamant they do not want to take advice, and for their part advisers do not want this “forced business” in the first place – as demonstrated by the ongoing furore around insistent clients. As we reveal this week, some advisers are going to extremes by attempting to price themselves out of unwanted business.

So advisers find themselves in an unusual situation, and unusual situations require unusual courses of action. Money Marketing understands high-level talks are taking place to scrap the advice requirement altogether, and that this is being driven by none other than advisers themselves. This is a stark reflection of just how broken the current system is, when advisers are advocating against advice.

If pension freedoms continue to fail consumers, nobody wants to end up with the finger of blame pointed squarely in their direction. Not advisers, not providers, and certainly not the Government.

Natalie Holt is editor of Money Marketing – follow her on Twitter here



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There are 3 comments at the moment, we would love to hear your opinion too.

  1. It is a mess, which is shame because the changes have some real merits. I think we need to be careful about claiming that advisers are driving the demand for abolishing the need for advice. Advisers are perfectly happy to advise it is just, as many of us have known all along that the typical pension pot size makes paying for advice potentially uneconomic for the pension pot owner.

    The insistent client farce is easily dealt with by advisers who are confident in their own skills- its a bit like the advice that used to be handed out in respect of drugs “just say no!”

    You are right though this is a mess of the Government’s own making- not that they will admit it

  2. Who can blame advisers for pricing themselves out of business that they don’t want? What should we do instead ~ lower our advice charges to attract such business?

  3. Is it me or is there a fundamental lack of understanding within government circles about pensions!

    It’s okay giving unfettered access to pension pots we support that move but some old pension pots have important guaranteed contractual rights which consumers should not just wave away willy-nilly.

    What advises in the pension industry are scared of is not pension freedom we are scared of claims management firms sticking in complaints when people run out of money. See we now live in a culture where it is always somebody else’s fault and what is needed here is clear rules where if a client wants to go off and spend all of their money a clear precise declaration is signed where clients cannot later complain that they were mis-advised.

    I don’t see that ever been put in place so advisers will be forced to adhere to financial planning principles, see it is our signature at the bottom of the paperwork not the governments.

    Really do wish government ministers and local MPs go and have discussions with local AUTHORISED financial advisers to get our opinions rather than just taking anecdotal evidence from either large providers, ivory tower FCA chiefs, or dare I say it unregulated journalists! The real world is very different!

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