The Financial Conduct Authority has claimed access to the pension advice allowance is "prominently advertised" in correspondence sent to consumers approaching retirement.
The allowance, which came into being in April 2017 following a recommendation in the Financial Advice Market Review, a joint initiative by the regulator and HM Treasury, allows pension scheme members to withdraw £500 a year tax-free, up to three times in their life, to pay for financial advice.
In a policy statement published today (January 28) on feedback to the regulator’s Retirement Outcomes Review, the FCA said the advice allowance is clearly signposted on factsheets included in ‘wake-up’ packs sent to all consumers aged 55 plus.
The FCA pointed to page 38 of the Money Advice Service (MAS) factsheet, to be included with the ‘wake-up’ packs, which said: "Pension Advice Allowance Allows you to withdraw £500 on up to three occasions from your defined contribution pension pot/s tax-free, to put towards the cost of pensions or retirement advice.
"Can only be used once in any tax year. May be used at any age and redeemed against the cost of regulated financial advice either face-to-face, by telephone or online.
"Not available with defined benefit schemes, but can be used if you have a ‘hybrid’ pension that has a defined contribution element."
The regulator said it considered the framing of these packs to be "appropriate".
The comments were made in response to feedback in which several respondents said the ‘wake-up’ packs should signpost consumers towards advice, and the advice allowance.
The respondents suggested the packs should be "reframed to be more positive", the language used needed to be “clear and jargon‑free”, and the FCA’s rules should allow ‘wake-up’ packs to be provided electronically.
In response, the regulator said: "We agree that the language used should be clear.
"Firms should note that our rules require firms to provide information in a durable format, which needn’t be paper‑based."
Last year the uptake of pension advice allowance faced scrutiny, with major providers claiming they were seeing little or no interest in the measure and minimal demand for cash to pay for advice in this way.
Steven Cameron, pensions director at Aegon, said: "With the FCA’s main concerns over drawdown being for those who don’t seek advice, it’s more important than ever that the value and benefits of seeking advice are highlighted through all available routes.
"That should include wake-up packs, provider communications and the MAS booklet. It’s also helpful to highlight the ways customers can pay for advice, including by separate fee or from deductions from the pension policy.
"Most providers will offer an adviser charging facility allowing the customer to instruct the provider to pay a fee to their adviser out of their drawdown product.
"Far fewer offer the pensions advice allowance because it restricts the payments to £500 on up to three occasions at least a year apart. While the PAA can pay for more general retirement advice, if the client is taking out a specific drawdown product, the AC route works well and offers far more flexibility."
A spokesperson for Prudential said: "Prudential supports the principles of the pensions advice allowance, and we have investigated making this available.
"However, because there has been minimal demand to date from consumers we have prioritised making other positive changes such as removing or reducing charges and will continue to monitor demand and act accordingly.
"It is important to bear in mind that the allowance is not a government allowance to part cover the costs of advice but rather a facility that allows savers to access £500 from a pension fund up to three times, in order to pay for advice."
rachel.addison@ft.com
