Royal London chief executive Phil Loney has said that mandatory advice on drawdown could be a “potential solution” to problems in the market as he hits out at how providers treat non-advised clients.
Speaking with Money Marketing, Loney said that the company was worried about how customers in the back books of long-established pension companies are being offered only in-house products when they go into drawdown without advice.
Loney likened the situation to where customers were being offered second or third quartile annuity rates by their existing providers.
Asked whether he would favour mandatory advice on drawdown to address the issue, Loney said: “You could do that. Generally speaking, it’s difficult to get to that point because of freedom concerns but that might be a potential solution.
“If you don’t go down that route what I’m envisaging is something like what you have in the annuity market. You write to the customer thinking about an annuity, and rather than in-house, you send them to a website where they can get the range of rates across the marketplace to get the best deal for them. There’s no reason that can’t work for drawdown.”
The FCA has previously told Money Marketing that mandatory drawdown advice may not be suitable for those with smaller pots.
Loney said the firm still had no plans to offer its own advice.
“We think the best type of advice is impartial advice. It makes sure the customer gets a clear recommendation about what they should do, and figure out what the problem is they are trying to solve sometimes. It looks across the market for the best product for them. That’s why we don’t want to vertically integrate ourselves.”