Ensuring advice given today does not backfire

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.

She says clients need to be aware of the impact of all the choices made at each stage.

For example, she says even if they don’t intend to make contributions in the future they need to be aware of the impact taking a UFPLS or other income will have on their ability to do this should circumstances change.

She says: “Just because it isn’t an issue now it could become one.”

Given the depth of knowledge required to advise in this area, David Trenner, technical director of Intelligent Pensions, says if you do not specialise in retirement income then you should now consider outsourcing advice.

John Lawson, head of policy (retirement solutions) at Aviva, says advisers should take their time when giving clients any type of advice about the new retirement income rules.

He says: “No need to rush clients to make up their mind now. The new pension rules allow complete flexibility and no harm is done leaving money within a pension until the client’s mind has been made up.”

Another major concern is ‘insistent’ clients seeking, for example, to transfer from defined benefit pensions to take advantage of the new freedoms, despite it being unlikely to be in their interest.

Some, including Personal Finance Society president Keith Richards, have said advisers should not process business in these cases where it goes against recommendations, amid concern that supporting clients could be construed as tacit advice.

Under new rules published by the FCA, all transfers from a guaranteed benefits to flexible benefits will require full, regulated advice advice, even where the move is to a trust-based scheme regulated by the Pensions Regulator.

Transfers from a DB scheme will need to overseen by a transfer specialist holding a qualification such as the CII AF3. Clients are, of course, at liberty to ignore the advice offered.