PI insurer warns of mounting complaints over LTA cuts

Advisers must be proactive with lifetime allowances, a professional indemnity insurer has warned after receiving multiple claims from clients on the failure to provide enhanced protection.

Richard Turnbull, underwriting director of Collegiate Underwriting, said defences were “thin on the ground” for advisers who did not plan ahead for the government’s cut in lifetime allowances from £1.5m to £1.25m in the 2014/2015 tax year.

He added: “Eventually the customer will want to access those pension funds and the consequences of not getting the advice right or just missing the need to deal with that customer will be obvious.

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“Invariably this will lead to a complaint that will need investigating. Defences are usually thin on the ground and it becomes a loss calculation exercise with both the IFA and insurer being out of pocket.”

Mr Turnbull has devised a checklist for advisers to follow ahead of the shake-up next year. He said advisers should to write to clients who could potentially breach the limit with further growth of their pension fund.

His comments follow a warning from Roland Jones, associate director of Oxfordshire-based Oaktree Wealth Management, who said last week: “Clients could seek huge sums in compensation for not receiving the correct advice to avoid liabilities.”

Chris Hannant, director general of Association of Professional Financial Advisers, said: “Advisers need to take extra care and consideration, as they have always needed to, as they are ultimately responsible and should conform to the law of the time in this area.”

Top Tips

• Have a complete summary of pension savings including any final salary schemes.

• Make an application to HM Revenue & Customs before 5 April 2014 where fixed protection is appropriate

• Ensure advice is put in writing when clients want to continue contributions despite evidence that the pension fund might grow above £1.25m

• Ensure appropriate advice is given to the client about suitability of contributions above £1.25m

Click here to read Financial Adviser’s full overview of the lifetime allowance and the range of protections that are now available for clients.