A leading pension IFA has warned advisers to wake up to the damage that the national pension savings scheme could do to their business.
Despite a range of measures to protect against levelling down, the Government’s own estimates in the second Pensions White Paper are that £3.2bn of the £8bn channelled into personal accounts in the first year will come from existing savings. Much of this will come from existing occupational schemes as funds are redirected into personal accounts, or other savings vehicles such as Isas.
Richard Jacobs Pension & Trustee Services director Richard Jacobs says IFAs face losing all their stakeholder business “at a stroke” as it will be impossible to justify keeping those clients in stakeholder contracts once personal accounts are introduced.
He considers that this would be particularly galling as many advisers only sell stakeholder products with the prospect of making any money over the long term.
Jacobs urges IFAs to act now to help mitigate the effect of personal accounts. He says that advisers need to start budgeting for the impact on their business and set up their advice model in the group market for employer-based fees.
He says: “At the bottom end, most clients pay through trail commission and are not prepared to pay fees.
“Once personal accounts come in, we will lose the commission that kept us ticking over on stakeholder business.
“IFAs need to tell employers to pay a certain amount per year for advice. This can be a nice workable model.”
“Most IFAs just totally ignore the NPSS. They think it is too far away, might never happen and will not affect their business. But it will happen and it will affect everyone. They need to wake up now or they are heading for a big fall.”