RegulationJun 10 2014

James Hay sees a 319% rise in fixed protection queries

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James Hay Partnership has seen a 319 per cent uplift in the number of fixed protection queries from advisers in the first three months of 2014 compared with the same period in 2013.

The platform, which runs a pension and trust technical support helpdesk for advisers, says while lifetime allowances topped the list of topics exercising the minds of advisers at the start of this year, it was fixed and transitional protection that saw the biggest spikes in the increase in the number of calls received in the first quarter of 2014 compared with the same period last year.

In the first quarter of 2014, James Hay received 88 calls from advisers on this topic.

James Hay also received 103 calls in the first three months of this year, an 81 per cent uplift on the first quarter of 2013; 87 calls on the annual allowance, a 16 per cent increase; 65 calls on contributions, a 3 per cent uplift and 51 calls on transitional protection, a 96 per cent increase.

At the start of the new tax year, the standard lifetime allowance for pension savers will be reduced for the second time since 2011, from £1.5m to £1.25m.

In addition to existing primary, enhanced and fixed protection, the government introduced two new forms of protection to crystallise the pre-April 2014 £1.5m level: fixed protection 2014 and individual protection 2014.

Most of the protections, with the exception of individual protection, are lost if the saver makes any further contributions to their scheme, potentially subjecting them to a retrospective tax bill.

The data supports a solicitor’s warning that she is seeing more claims against advisers from clients that have breached the new lower pension lifetime allowance.

Philippa Hann, a partner in the financial services litigation team at law firm Clarke Willmott, is currently dealing with three separate clients regarding mistakes by financial advisers in “failing to adequately investigate their [clients’] pensions resulting in bad advice”.

Paul Bagley, director of distribution development, said: “With the Budget focusing heavily on pensions, we fully expected an increase in the number of technical calls, which is indeed what occurred.

“The significant rise in calls around fixed protection underlines that with the continuing reduction in the standard lifetime allowance, people’s minds have simply been focused on the fact that more and more of them will suffer a lifetime allowance tax charge.

“Individual protection is now currently the only option available to protect their pension savings if they have not already implemented any of the other forms of protection.”

Ms Hann previously said: “The clients have either had advice to make a contribution to their pension meaning that they have lost enhanced protection or the adviser has failed to advise their client to take up transitional protection.

“In all cases the client is now facing a far larger tax bill than they should. Two of the complaints are now with the Fos. I think it will be an issue affecting all IFAs.”