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Providers mandate advice on internal pension transfers

Providers are demanding customers take advice before transferring from old to modern schemes to access the new pension freedoms.

Advisers are already being used by the Government as a defence against people making poor retirement decisions. The Government has said people must take advice before transferring out of defined benefit schemes.

An FCA consultation published in March proposes that people with “safeguarded benefits” – including those with guaranteed annuity rates – need to take financial advice, which in some cases will have to be done by advisers with specialist qualifications, before moving schemes.

Now some of the country’s largest providers are planning to force customers to take advice before transferring from old plans that do not offer the flexibilities to modern schemes that do.

The Pensions Advisory Service chief executive Michelle Cracknell says the main issues facing users of the service is getting access to their funds from old schemes. She says providers need to be clearer about the steps members need to take before they can take action.

L&G says anyone wanting to move from old products to newer versions needs to take regulated advice on the switch. Likewise, Aviva says the customer “must always seek advice” for an internal transfer.

Prudential will also be mandating advice. All its legacy contracts will allow full UFPLS while all except the Ex Sal and M&G S226 plans will allow partial UFPLS, but no legacy plans will allow flexi-access drawdown.

Standard Life head of pensions strategy Jamie Jenkins says the firm will allow customers to switch over the phone or online. He says: “It’s a question of proportionality. You could say ‘let’s make everything advised because there’s risks inherent in everything’. But there’s a point at which making somebody take advice when it’s something we can do relatively seamlessly becomes prohibitive.”



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

  1. It’s a shame they didn’t take this stance before the ‘Execution Only’ Annuity Broker boom.
    Just imagine how many poor soles have lost their protected benefits over the past few years…
    If you listen carefully, you can almost hear the PPI Claim Firms readying themselves for a switch.

  2. Andrew Pritchard 9th April 2015 at 6:07 pm

    its ‘Liability – Pass The Parcel’ time, the fun game show where everyone waits to see which adviser gets ruined. ….and here’s your host – The FCA

  3. It’s quite unfortunate that providers are seemingly so fearful of CMCs and FOS that consumers can’t make their own decisions with their own money…. we’ve had a recent case where a client simply wanted to move to drawdown with Pru and she was forced to seek advice. Business for us, but a cost to the client.

    We’re also seeing this creep into advice mentality where advisers feel that they can’t help/deal with clients who perhaps want to do something which, solely from a financial point of view might not be sensible, but perhaps from another point of view it might make perfect sense.

    It’s going to be a very interesting few months (perhaps longer) until some kind of ‘business as usual’ emerges…..

  4. I hope as more advisers avoid pension and investment advice there is a clear distinction to ensure mortgage brokers do not have to pay the price to pick up the pieces.

  5. It is really a very simple process which is no different to pre 6th April. You complete the same advice process and if before the freedoms came in the advice was to leave things alone because it was not in the clients interests to switch, that advice will be no different now.

    The problem now is that the client may still want to access THEIR MONEY, regardless of the fact its better for them not to take it. If a provider is unwilling to release the money unless the business comes in via regulated advisers and the adviser won’t do that because of the potential risk to his/her business, which is only sensible. There are going to be complaints coming in saying my provider will not give me my pension money. It will be interesting how the FOS will deal with this.

    Will the Government put pressure on FCA to pressure FOS to find in favour of complainant because the adviser/provider would not allow these people to access their freedoms. How perverse would that be, but I can see it not being out of the realms of possibilities.

  6. @Paul Stocks – I agree with Marty – The advice is likely to be no different to pre April. All it is, is that for certain cases,where the advice is NOT to do something, the adviser will simply NOT do it (as per guidance from PFS based on FOS comments) and throw the problem back at the provider and F-pack to find a solution to insistent clients I personally think a clearing house system is the only realistic solution for insistent clients as it would centralise oversight of people acting contrary to advise and make ease of investigating WHY they are declining to follow advise more straightforward (i.e. are unregulated investment firms marketing influencing them).
    A logical way of looking at it is that;
    1. If pre April a client would have been eligible for Flexible Drawdown, then it is probably suitable now
    2. If they’d been eligible for triviality pre April 2014, it is probably now
    3. If they’d been eligible for triviality post April 2014, it is probably now
    4. If they have only become eligible in the last few days, it is these consumers where most care will be needed as secure income will probably still make sense for them to arrange, whether that be via an annuity or drawdown with a guarantee attached

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