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