Aegon calls on Treasury to fix advice allowance

Aegon calls on Treasury to fix advice allowance

HM Treasury should merge the pensions advice allowance with adviser charging, according to Aegon’s pensions director.

Steven Cameron said this could be addressed by reforming the way adviser charging works.

At the moment an adviser can only be paid through adviser charging from a particular pension if they are going to provide advice on that pot.

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But Mr Cameron said this rule should be changed so adviser charging from a pension can be used on wider retirement planning.

He said: “The pensions advice allowance was designed as a variant on adviser charging.

“It offered more flexibility in that it could be used to fund advice on broader retirement planning and not, like adviser charging, just on the pension from which it was deducted.

“However, it falls short of adviser charging as it is capped at £500 and can be used no more than three times, limiting its suitability to fund either one off or ongoing advice.

“The principle of being able to fund broader retirement advice by deduction from existing pension funds is to be welcomed.

“But with the pension advice allowance failing to take off, we would be in favour of current adviser charging rules being relaxed to allow it to pay for broader retirement advice. This would represent the best of both worlds.”

The pension advice allowance was the result of one of the recommendations from the Financial Advice Market Review.

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

Providers such as Aegon, Legal & General, Standard Life, Aviva and Scottish Widows have said they have seen no demand for the allowance.

Mr Cameron said using the allowance was not noticeably better than adviser charging, so most advisers will be continuing to use this.