Personal Pension  

More calls for gov’t to relax GARs advice policy

More calls for gov’t to relax GARs advice policy

Another provider as well as the Association of British Insurers have called on the government to relax the current policy where savers with guaranteed annuity rates must get regulated advice if the pot is above £30,000, stating that Pension Wise should be able to deliver this as guidance.

In an open letter to new pensions minister Ros Altmann, Royal London chief Phil Loney wrote that just two months into the new pensions regime it is “very clear” that the policy to safeguard savers with guaranteed annuity rates is a failure.

To protect savers, the government introduced legislation that anyone with safeguarded benefits in a pension pot that is above £30,000 - such as guaranteed annuity rates or defined benefit schemes - must take regulated financial advice if they intend to cash in their fund.

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Mr Loney admits that this is not a decision to be taken lightly, but warned that savers with pots slightly above the £30,000 threshold are frustrated that this policy is in place and providers are preventing them from accessing their cash.

“Clearly it was the intention of the legislation to safeguard savers with GARs by requiring them to seek the advice of a qualified adviser,” he wrote. “Two months into the new pensions regime it is very clear that this policy to safeguard savers with GARs is a failure.

“Providers are accused of creating barriers to prevent customers exercising their rights under pension freedoms.”

Mr Loney added that advisers are “reluctant to engage” with modest savers finding the limited scope of advice on GARs an uncommercial proposition.

“Others that might be disposed to assist modest savers are put off by the prospect of subsequent regulatory sanction when savers come to understand the value of the guarantees they have given up.

“The situation that savers with GARs currently find themselves in is deeply unsatisfactory and risks bringing all parts of the pensions industry and the freedoms themselves into disrepute.”

He added that a solution to this would be for the legislation to change and for Pension Wise to deliver this.

This follows calls from Legal and General’s pensions strategy director Adrian Boulding earlier this week, telling FTAdviser that people with these guarantees are balking at the price of regulated advice.

He pointed out that many people will balk at the price of advice, while many advisers do not want to deal with so-called ‘insistent clients’.

“We could break this log jam if the government rescinded this legislation and replaced it with a requirement on the ceding scheme to alert customers to the existence of guaranteed annuities,” stated Mr Boulding.

Mr Loney, agreed in the open letter: “The existing legislation requiring savers with GARs over the £30,000 threshold to seek advice from an FCA authorised adviser should be relaxed as a matter of urgency.

“There is no reason why the Pension Wise service should not be able to provide necessary guidance on GARs enabling savers to take a considered and informed view of their retirement provision.”

He conceded that this will require a change to legislation and the FCA rulebook along with a change in provider procedures if they are required to provide Pension Wise with details of a customer’s GAR.