Pension freedoms did not result in all providers revamping their options for those entering retirement and as a result transfers to schemes that do are having to be contemplated.
However the Financial Conduct Authority’s most recent statistics on pension freedoms showed some product providers will not allow policyholders access to their pension fund unless they have received and paid for financial advice.
The FCA’s analysis of pension freedoms data, published on 16 September, found some providers required advice over and above the legislative requirements.
A small number of firms outside of the largest 15 require advice for those seeking to transfer in all cases, and some firms require advice in other circumstances.
This clearly does not sit comfortably with the new pension freedoms legislation and the chancellor’s promises.
The FCA is considering whether pension rules need to be changed in light of pension freedoms.
Pension providers are not charitable organisationsBut should pressure be put on the product providers that fail to throw open the lid on their potentially Pandora’s Box of pensions?
Just as it would be wrong to force advisers to offer free advice - you all have roofs over your heads that you must pay for, mouths to feed, etc - pension providers are also not charitable organisations.
Following the most recent FTAdviser On Air webinar on pension freedoms in practice, which is now available to watch on demand, I picked the brains of panelist and adviser David Trenner, technical director of Intelligent Pensions, on this subject.
Ultimately, is the easy solution to the issue of transfers forcing all pension providers to offer pension freedoms?
Mr Trenner said: “I do not often side with providers, but I am absolutely with them here.
“Policies were written - in some cases before George Osborne was born - and they included various conditions which both parties had to adhere to.
“Just as Equitable Life could not wriggle off the hook on guaranteed annuity rates, so policyholders cannot expect their policies to be rewritten to allow payments which were illegal when they bought them.
“George Osborne wanted pension freedoms to be his big scoop, so he did not discuss them with the FCA or the ABI - or even his pensions minister Steve Webb. Had he done so someone would have told him that his big vote winner just could not be made to work.”
While it might suit some companies still seeking new business to make changes, for the many companies closed to new business this was just not possible and could threaten their ability to continue.
Policies were written with charges coming out of the ‘back end,’ meaning that policyholders had not yet paid all of the set-up charges, including commissions to their adviser.
To waive these charges would be unfair to the remaining policyholders and could put a stake through the heart of those providing these already dead end funds.
The government should not force all providers to offer pension freedoms.
What the regulator and government needs to make sure of is that consumers can vote with their feet and opt to transfer to another policy that does offer full access to pension freedoms but perhaps without the guarantees of their older pension plan.
Ultimately though advice is what is needed here to check if investment guarantees or safeguarded benefits are locked inside saver’s pension boxes that will disappear if they are opened in order to grab a cash lump sum.
Just as providers shouldn’t be pressured into offering things that will cripple their financial stability you also need to earn a living.
Many providers have called for the law on mandatory advice on safeguarded policies to be dropped in favour of mandatory guidance from Pension Wise.
I disagree.
Once again, is it time to raise the subject of why can’t at least some of the cash going towards Pension Wise instead go towards vouchers.
Pension freedoms should deliver greater choice. Savers should have the option of guidance or an initial free session with an IFA.
To watch the latest FTAdviser On Air about pension freedoms in practice, and earn CPD, click here.
