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Providers under fire over death tax failure


Providers will not allow customers in old pension policies to benefit from the changes to the death tax on pensions without transferring, Money Marketing can reveal.

Advisers seeking to make use of the new flexibilities, including the ability to pass savings through the generations or take pensions as income, have been left frustrated and warn extra costs could be passed on to clients.

Aegon, Aviva and Royal London says some customers in older products may have to transfer to take advantage of the changes.

An Aegon spokesman says the provider is working on extending the death benefit flexibility to older products.

He says: “Aegon enables the full range of pension flexibilities from its Arc and One Retirement platform and customers in all the products have the ability to upgrade to the platform to take advantage of the pension freedoms.

“The rules around death benefits and who can be nominated as beneficiaries and what they can do with pensions assets passed to them were significantly revised by the reforms. The changes mean that instead of simply receiving a lump sum, beneficiaries have the ability to keep pension assets invested in flexi-access drawdown.

“Older products were not designed to enable the level of flexibility now introduced by the Government but we currently looking at options to extend new benefit to customers in older products.”

Royal London business development manager Fiona Tait says the firm’s Pension Portfolio product is fully complaint, but for “other contracts, including legacy products, the terms and conditions do not currently allow pensions to be paid to anyone other than the member or a financial dependent, in line with legislation applicable at the time of launch.

“We are actively looking to see if we could offer any alternative options for these products but we are still seeking absolute clarity on the legal situation and would need to create the necessary administrative processes, both of which are likely to take some time.”

J.M. Glendinning Financial Services director Andy Holder says clients will be forced to stump up extra fees if advisers are forced to provide advice on transferring to a platform.

He says: “After all the posturing by the Government providers have to be as flexible as they can to accommodate the new rules. Not allowing something like this is just pedantic.

“It’s a sad indictment of the industry that a number of providers are not co-operating.”



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There are 7 comments at the moment, we would love to hear your opinion too.

  1. Let’s be fair here!! Providers were given no notice about these changes and they involve systems alterations. There was no shortage of systems work already in progress so this was dumped on the industry by the chancellor. If George O had offered a consultation process then there would have been some warning to the industry but that step was overlooked. What we are witnessing is not provider failure but the inevitable consequences of government policy being made on the hoof!

  2. I fully agree with your Richard. After all, how many years of notice and preparation did advisers have of the RDR changes, and the impending end of trail commission and the move to clean share classes? Yet how many were still dragged kicking and screaming through the doors of change in the end, with some still not having adapted to the new regime?

  3. Bit of truth in both camps really. Providers have been very slow historically to make changes that are for the benefit of the customer when it costs them time and money to make those changes. But then again which industry behaves any differently? But more than anything if George Osborne issues edicts with no allowance for the complications involved with providing the new freedoms there is little that the industry can realistically do to avoid a period of adjustment fraught with frustrations.

  4. Political soundbites again with no basis. Why would any business spend millions for the benefit of the few?

  5. In some circumstances I can see that technology needs to change but surely it’s mainly a matter of adopting scheme rules in order to permit the Trustees to pay the benefits out in a way appropriate – whether that be as a lump sum, nominee drawdown or annuity etc.

    In many cases the payment will be made away from the existing scheme and therefore the only exception would seem to be where funds go to nominee drawdown (and having said that, many old plans wouldn’t have offered drawdown in any case).

    Perhaps the issue already existed but only now has it shifted more into focus.

  6. Just imagine how many years it would have taken HMRC or any other government dept to make these sort of changes Osborne foisted on to the industry by his (welcome) changes to pensions. Five years, ten years? And how much it would have cost if they had to make the changes. Be fair to providers in this instance. I do get annoyed when we see the papers slagging off the industry about delays in implementing the reforms. The amount of calls to the providers about the changes were up about ten times and additional staff cannot be trained that quickly. Again, a government dept and the idle bug*ers working in them would have never coped!

  7. Chris 21st July 2015 at 5:00 pm

    Aegon are too busy moving clients to retire ready without client authority to spend time on their massive legacy book. They know that all their active member discount scheme are a rip off and they will lose the business so are moving all deferred GPP members to retire ready without client authority!

    They have spent the best part of two years trying to convince me to simply move off platform plans onto their platform. Aegon have no desire to change things when all they want to do is boost platform assets and remove clients from the advised space into the non advised space of retire ready.

    They certainly are not kidding me!

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