Prudential becomes first provider to shun advice allowance

Prudential becomes first provider to shun advice allowance

Prudential has become what is believed to be the first major pension provider to rule itself out of the pension advice allowance completely.

It has said demand has been almost non-existent for something which would be so complicated to administer.

In a statement the company said: “Prudential supports the principles of the pensions advice allowance, and we have investigated making this available.

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“However, because there has been minimal demand from consumers, and the PAA is complicated to administer, we have decided not to introduce a facility to use the allowance at this time. 

“However, we will keep the situation under review and may introduce a facility at some point in the future.”

Providers such as Aviva, Standard Life, Legal & General, Scottish Widows and Aegon have all said they offer the allowance.

But all have said demand for the policy – proposed and introduced as part of the Financial Advice Market Review – has been low.

HM Treasury originally intended to allow the tax-free withdrawal of a single £500 payment but increased this to three withdrawals of £500 after a consultation period.

In May HM Treasury said it is the responsibility of providers to market the allowance, but none of those said they had any firm plans to do so.

Earlier this week a spokesperson for HM Revenue & Customs said the tax body had not collated data on how many times the pension advice allowance had been used.

This was because there had been no reporting requirement included in the rules to avoid putting more burdens on business.

Jeremy Edwards, a financial adviser with Martin Redman Partners, said: "We have had no clients interested in the allowance. Realistically a proper fact find in order to establish everything will cost us £700 in terms of time and subsequent work so £500 is neither use nor ornament.

"It is one of those classic things which tested really well in a focus group. I imagine the system costs for providers are outrageous."