Royal London has renewed its call for an urgent review of advice rules to enable a ‘cost-effective’ advice option for savers looking to cash-in modest pension pots, after official data were published showing that savers have taken £1bn from pots since April.
Phil Loney, chief executive of Royal London, said an advice regime is needed that enables customers to make informed decisions when accessing their pension funds.
Yesterday (16 June), chancellor George Osborne revealed in the House of Commons that 60,000 people have made use of the pension freedoms since they came into effect in April, who have collectively transferred £1bn out of their pension funds.
It is not clear how many have cashed in their pensions entirely, but with an average pot size of £16,600 it is likely the number reflect a combination of the smallest pots being taken in full and partial withdrawals from larger funds.
Mr Osborne said the data showed that the pension freedoms have been a “real success, but we have to make sure that people get the best advice, that the market responds and that companies up their game in helping customers make use of these freedoms”.
Mr Loney said: “For two years Royal London has been calling on the government and the Financial Conduct Authority, to deliver an advice regime that meets the needs of mid-market savers who typically have medium-sized pension pots.
“Since pensions freedoms became a reality in April the need for such an advice regime has intensified, but neither government nor the regulator have acted to decisively resolve this problem.”
Royal London had said at the turn of the year it could seek to move into the perceived gap in advice provision, after telling FTAdviser during a video interview it was in in informal discussions with advisers over how to deliver a service to those not catered for Pension Wise.
All providers have been tasked with delivering risk warnings in non-advised cases, known as ‘second line of defence’, and also ensuring that those with customers with safeguarded benefits or in final salary schemes with more than £30,000 take advice before accessing their fund.
FTAdviser has previously revealed that a number of consumers unable or unwilling to pay for advice for pension transfers in particular are asking advisers to provide a letter stating advice has been taken when it has not.
Mr Loney said: “It is clear that access to the advice required, at an affordable cost, is a real issue for customers across the UK.
“We are calling on the government and the FCA to give immediate priority to delivering an advice regime that is affordable for these customers and commercially viable for advisers.”
Adrian Walker, retirement planning manager at Old Mutual, added that the UK has a “problem with saving, not spending, so care needs to be taken when deciding how to measure the success of the pension freedoms”.
He said: “I would suggest that a more appropriate measure of success will not come for many years, when those people who have withdrawn money from their pensions are still enjoying the retirement they planned and saved many years for.”