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Ensuring advice given today does not backfire

This article is part of
Guide to The Brave New Pensions World

As with any advice given, David Macmillan, managing director of Aegon, says it is important that you are up to date with the rules - and there are no guarantees that there won’t be further changes to government policy in the near future.

Topics like tax, inheritance, and so on, will all become hugely more important for a lot more people now.

Mr Macmillan says it is also important to acknowledge that as more people take advantage of the flexibilities they will also require regular financial reviews to ensure their choices still fit their needs and life stage – just as they do when they are saving.

He says: “Continuing to engage with your clients and providing them with modern digital ways to keep track of their progress will be important to help ensure they make the most of their savings and your advice.”

Advice can only be given based upon known legislation at the time but Martin Tilley, director of technical services at Dentons Pensions Management, agrees a good way to ensure advice is agile is to keep abreast of developments and review the affairs of your clients on a regular basis.

He says: “It is not only the pension freedoms that need to be taken into account but the easement on taxation of benefits payable from pensions on death too.

“With the ability for administrators to distribute to a wider range of beneficiaries, ensure the pension provider is continually up to date with the wishes of the member.”

Paul Evans, pensions technical manager of Suffolk Life, says there will be a number of new products that will be launched over the coming months, as well as revised features on current products.

He says it is essential that advisers take time to ‘stress-test’ these innovations to try to understand where a client may question recommendations on such products.

He adds advisers should understand what potential hazards could occur under new legislation.

For example, Mr Evans says taking income withdrawals in excess of the maximum capped drawdown limit and unintentionally triggering the money purchase annual allowance, or by a client withdrawing their pension through UFPLS, when they have a protected lump sum.

He says: “The only constant in pensions is constant change. It is inevitable that pensions will continue to evolve, and advisers should look to incorporate a legislation check into the future service, or to warn transactional clients to seek assistance should future changes occur.

“However, there are positive reasons why the changes can assist in managing future relationships for pension clients.

“The April changes have re-energised public interest in pensions, and many clients are positive over what they can do with their pension.

“By presenting a dynamic and interactive solution, advisers can educate and engage clients in a way that they understand both the risks and rewards in the advice that they receive. Such clients will offer the strongest long-term relationship.”

Education is key for advisers wishing to protect themselves, agrees Claire Trott, head of technical support at Talbot and Muir.