Enhanced annuity specialist Partnership has called on the Government, trade associations and financial advisers to urgently tackle concerns that the RDR will limit access to advice for people with small pension pots.
Its research shows less than half of annuitants who have shopped around for a retirement product know what an annuity is and 75 per cent of those who chose an enhanced annuity did so because it was recommended by a financial adviser. But Partnership warns the RDR will make it prohibitively expensive for most IFAs to service clients with small pension funds.
Managing director of retirement Andrew Megson says the RDR will cause “significant consumer harm” unless people with small pension pots can access independent financial advice. He says: “The UK is facing a retirement crisis, yet the FSA’s proposals may play a significant unintended role in stopping less wealthy pensioners from maximising their retirement income in old age.
“We fully support the principles underpinning the RDR but there will be significantly reduced numbers of experienced financial advisers to guide customers on their annuity options.”
Sesame says policymakers should undertake a detailed review of the implications of the RDR on people with small pension pots. Executive chairman Ivan Martin says: “It is vital we face up to the repercussions of the RDR implementation and specifically the significant number of experienced advisers leaving our industry.
“We must work together to find a way around any negative effects of leavers so that pensioners with small funds and those who suffer from ill-health are not disadvantaged by the changes.
“A detailed review of the implications is essential to assess all the risks. We are fully supportive of this campaign.”
Hargreaves Lansdown pension investment manager Laith Khalaf says: “Partnership has produced some interesting analysis but I do not think it is clear cut that the RDR will deprive people with small pension pots of advice. The Treasury is already investigating ways to make more people shop around, possibly even making it the default option, which I think is a more productive strategy in getting people to look at enhanced annuities.”