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.”