Advisers may feel “uncomfortable” but if they want to cash in on the retirement freedoms that came into force this week they should be prepared to offer “ad hoc advice” to clients unwilling to commit to a formal, ongoing relationship, Neil MacGillivray argues.
The head of technical support at James Hay Partnership and chairman of the Association of Member-Directed Pension Schemes, makes the comments in the latest FTAdviser video interview, during which he discusses the likely winners and losers from the reforms.
Mr MacGillivray says the hard core of individuals who will never want to use a financial adviser will have to rethink that standpoint when they they seek to access their pension pots, to avoid punitive tax charges and other common pitfalls.
He tells Financial Adviser’s Simoney Kyriakou: “We are going to see a big change. Maybe individuals who want ad hoc advice when they feel they require it.
“When it comes to life changing circumstances such as reaching retirement or needing to take out additional money that may be when they feel the need to seek advice. Advisers may feel uncomfortable with giving ad hoc advice but it will definitely be a growing market.”
Mr MacGillivray speculates the changes brought about by greater pension freedoms are going to be massive for the self-invested pension sector in particular.
But he adds it is not all good news and that “a lot of transfers into it will be very short-term because people will be using it as a way of taking their money out tax effectively, especially if their current pension provider cannot give them the flexibility they need”.
This echoes concerns raised by representatives of a number of Sipps firms, who suggested money moving in may quickly disappear in lump sums or accelerated drawdown. Some including Hargreaves Lansdown have sought to combat this by introducing ‘quick flip’ exit charges.
Mr MacGillivray said: “I think really the big winners out of all this will be Sipps within platforms. I think under the freedoms retaining your money within the pension is a very attractive way of transferring money between generations.”
emma.hughes@ft.com
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