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.”