Life offices are withdrawing their contracting out recommendation templates after recent changes to rebate levels have made the decision too close to call.
The move leaves IFAs with nowhere to turn for guidance as they wrestle with the marginal differences between Serps and contracting out before making a recommendation.
Until recently, most life offices provided model age and salary recommendations which relieved advisers of some of the burden of determining best advice for their clients considering contracting out.
But since the Government Actuary Department set rebate levels in March which were not generous enough to make the decision obvious to policyholders and their advisers, life offices have been forced to wash their hands of respon-sibility and leave these decisions purely to IFAs.
Legal & General this week joined other life offices saying they are not able to offer recommendations on pivotal ages either for their salesforce or IFAs.
L&G pensions marketing manager Andy Agar says: “Clearly, the whole industry is wrestling with this issue and no one is saying publicly what their view is. Based on a single-charging product at 1 per cent, it is often not demonstrably better to contract out. We are conscious we need to tell IFAs and while normally we would want to make recommendations it is very difficult to do so. Contracting out is now more a question of the customer's attitude to risk.”
Torquil Clark pensions development director Tom McPhail says: “About two years ago, every life office would produce pivotal ages. Now hardly anyone does, casting IFAs out into the wilderness. The Government Actuary has made rebates deliberately marginal, so the issue has becomes less about numerical issues and more about who the client trusts more – either the Government or life offices.”