Pru pulls contribution ‘holiday’ option on pre-RDR plans

An IFA has criticised Prudential for removing the option to take a contribution holiday on personal pensions sold prior to the Retail Distribution Review, meaning that a client that misses a payment would be forced to take out a new policy.

Chris Miller, proprietor of Bath-based Christopher Miller Financial Planning, told FTAdviser that at previously a client could cease paying pension contributions on a Pru personal pension plan for a year before it entered another ‘phase’, meaning the ‘holiday’ would not affect the pension.

Now, however, Prudential have removed the option for pre-RDR business. A spokesperson confirmed: “Post-RDR, if a customer chooses to reduce or stop contributions to a Prudential pre-RDR pension plan, they will no longer be able to restart payments on the same plan.

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“If a customer wanted to resume contributions to their pension they would need to take out a new, post-RDR pension plan.”

Mr Miller said the option of taking out a new plan would mean “a new contract would have to be re-written which means the adviser charge would kick in; a new fact find, meetings, completing application forms and money laundering forms for a limited company”.

Mr Miller has two clients, a husband and wife, who have separate personal pension plans with Prudential and Scottish Widows respectively, which were both taken up pre-RDR. He said the holiday option was available on the Scottish Widows pension for contributions that stop for “over a year” and that this has not changed post-RDR.

The wife client who had the plan with the Prudential approached Mr Miller to get a contribution holiday, but when Mr Miller contacted the firm he was told that it was no longer possible as the systems can no longer accommodate this.

He said: “People liked this due to certain cash flow issues, particularly when running a smaller firm.”

Mr Miller submitted an official complaint to Prudential, which was rejected. Prudential’s terms and conditions state they can made amendments to the plans if they deem them necessary but Mr Miller does not believe this should apply to a main feature of the plan.

He said: “The changes made internally should not disadvantage the client but due to the cost of new advice, it would cost around £800. The client is being disadvantaged by the Pru and by the RDR.

“Other providers have been able to accommodate a contribution holiday. Pru is being inflexible and is not acting in the best interests of the client. The husband has a Scot Wid pre-RDR personal pension and he can have contribution holidays for over a year with no issue and there have been no amendments to this.”

The spokesperson for Prudential added: “We are sorry if this causes any inconvenience to advisers. Our charging structure has been designed to ensure that taking out an additional plan would not cause any financial detriment to the customer.”