Extra costs incurred by savers in accessing the advice allowance could drastically exceed the headline £500 figure, unless some of the biggest names in financial services act to allow the payment method.
Scottish Widows, Aviva, Zurich and Prudential have all said they do not offer customer-agreed remuneration, known as adviser charging, on all of their older pension products.
Their stance has sparked concern they will be unable to offer George Osborne’s Budget boost to those nearing retirement.
Details of how the allowance – which will permit those under the age of 55 to withdraw £500 of their savings tax-free to pay for regulated financial advice – will work are still under consultation by HM Treasury.
But if it does rely on a form of adviser charging, savers could face having to transfer into a new product to access the £500 to pay for advice.
Simon Webster, managing director of Kent-based Facts & Figures Chartered Financial Planners, said: “Consumers accept the contract the insurance company sets up. There is not necessarily anything in that contract allowing you to take £500 to pay for advice.”
Scottish Widows, Aviva, Zurich and Prudential have said that pension savers who want to use adviser charging as a payment method must transfer to a new product. But Mr Webster said life companies were not being up-front about the costs involved in that process.
He said: “There could an adviser charge of up 3 per cent, so it may end up costing you £3,000 to get the allowance – arranging a transfer is an entirely separate job.”
Adviser charging is a way for clients to pay via a charge on their premiums or funds, facilitated by their product provider.
It was introduced with the Retail Distribution Review (RDR) in 2012, when provider payments to advisers via product commission was banned.
HM Treasury is currently consulting on allowing savers to access £500 from their pension pots in order to pay for advice.
A spokesman for Scottish Widows said: “For ‘at retirement’ advice, customers in older-style schemes will need to move into a new product where the adviser charge can be facilitated.”
He added that the company was “looking into various options” for the advice allowance.
An Aviva spokesperson said a large proportion of its active pension savers – where they are still in accumulation – can access adviser charging, but those with older pensions will have to use other payment options.
It said it would look at ways to help customers access the advice allowance “once we see more detail”.
Zurich does not allow adviser charging on pensions taken up before the RDR because it has not seen “significant demand”, a spokesperson said.
It added: “This does not mean we will be unable to provide access to the Government’s proposed £500 pension advice allowance from the existing plan, but will need to review the detailed proposals before being in a position to comment.”
A spokesperson for Prudential said a minority of its customers with pre-RDR pensions do not have access to adviser charging and would need to transfer to a new product to use it, adding that the company is “considering the Government’s proposal to introduce a pension advice allowance”.
A spokesman for HM Treasury said: “The design of the pensions advice allowance will be a matter for consultation. We will seek to ensure the allowance will work for providers, advisers and consumers.”
