Advisers taking part in an exclusive video panel debate earlier today (25 March) on looming pension freedom reforms have raised the possibility of a ‘capacity crunch’ for advisers ready and willing to take on retirees off the back of guidance sessions.
Speaking during FTAdviser’s live On Air webcast, Chris Daems of Cervello Financial Planning stated that the government’s guidance service would “certainly” drive those towards paid-for advice that would not have previously considered it.
However, this positive message was tempered by a fresh warning over the oft-cited advice ‘gap’, as Mr Daems predicted there could be capacity issues depending on the strength of that demand, especially in the early months as a wave of pent up demand is released.
Richard Parkin, head of retirement for Fidelity in the UK, commented that the rush has already started in terms of next month’s pension flexibilities, with the firm’s clients split roughly half and half between those who want to take their money as cash and those who want to just take some.
However, perhaps emphasising the value of advice he said lump sum demand was significantly less among advised customers.
The regulator has consistently reinforced that providers and others must signpost advice, most recently making it a key element in guidance on avoiding scams aimed directly at retiring consumers themselves.
Mr Daems added that those with smaller pots are more likely to take their money straight away, while retirees that have carefully built up larger pots over many years will be “sensible enough to make important decisions”.
The debate moved on to providers preparedness for 6 April, with Mr Daems saying he was concerned about those with legacy back books of business, which may create issues in terms of conversion and access to the freedoms.
George Houston of Mattioli Woods agreed, stating that providers with both open and closed books might try to use the reforms as “conduit to move people onto new types of contracts”.
He added that a growth in the availability of unit-linked guarantees, or ‘variable’ annuities, would be a good thing, as currently there is limited choice. “Competition would drive better value, but we’re at the mercy of providers taking a deep breath and waiting to see what happens.”
Mr Parkin noted that most providers are still working out whether there is any appetite and waiting to see what people do before investing money in product development. Many, including the regulator, have previously said product innovation is more likely after the summer and next year.
Mr Daems added that there was a “danger of complexity getting in the way with new products”, with “some that will superficially do the job, but create issues over the long term”.
peter.walker@ft.com
If you watched the video live earlier, bank 30 minutes CPD by clicking here. An On Demand version of the webcast will be published on FTAdviser tomorrow.
