Mid-market advice vital to avoid ‘political bungling’

Mid-market advice vital to avoid ‘political bungling’

Royal London chief executive Phil Loney has warned that the pension reforms could become an infamous example of political bungling without more access to mid-market advice.

Unveiling the company’s business results for 2014, Mr Loney revealed that Royal London contacted 3,600 customers without an adviser in the last three months of 2014, urging them to contact The Pension Advisory Service.

But only 71 – or 2 per cent – of them did so.

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Mr Loney said: “A high priority on the ‘to do’ list of the next chancellor and pensions minister must be to address the advice vacuum for middle-market savers, with clear direction given to the FCA to make rapid and substantial progress.

He warned that, without appropriate impartial regulated advice, there was a clear risk that many over-55s would make inappropriate decisions. According to Mr Loney, this could land them with an unnecessary tax liability and an inadequate income on which to live.

Mr Loney added: “George Osborne’s pension reforms have the potential to become famous for helping people to improve their retirement incomes, but without plentiful and affordable financial advice they risk becoming an infamous example of political bungling.”

Royal London has estimated that people with pension pots of £80,000 or more will probably already have a financial adviser, and those with £30,000 or less could take all their savings without any tax penalty.

However, those in between – from £30,000 to £79,999 – would need the most help.

Results Snapshot

According to Royal London’s results, new business highlights showed that its pensions division was performing well.

Its group pensions were up 83 per cent at £2.2bn, individual pensions up 25 per cent at £1.4bn, and drawdown had risen 73 per cent £781m year-on-year.

Asset management also achieved £2bn of net new external business in 2014.

Adviser views:

David Trenner, technical director for Glasgow-based Intelligent Pensions, said: “One of the biggest problems with how people are approached into retirement is that they get too much information and they simply don’t read it.

“Royal London is right that people with small pots should take it as cash in the majority of cases, but I don’t think they will, and if you take the people who cannot afford to take advice you have got a gap there.”

Patrick Connolly of Bath-based Chase de Vere, said the results reflected the company’s recent reorganisation with a real focus on the pensions market, adding: “The results suggest that Royal London is servicing the pensions market very well, with a broadly based proposition.”