Providers have 'little incentive' to offer advice allowance

Providers have 'little incentive' to offer advice allowance

While advisers continue to use pension providers who do not offer the advice allowance, there is little incentive for change in this area, according to guests on the latest edition of the FTAdviser Podcast.

Under current rules savers can take out £500 on three occasions from their pension to pay for advice without incurring a tax charge - giving a total allowance of £1,500.

However, this allowance is currently underused as many providers do not offer this service and many savers are unaware it even exists.

This week FTAdviser senior reporter Amy Austin is joined by Pete Glancy, head of policy, pensions and investments at Scottish Widows and Tim Morris, independent financial adviser at Russell & Co, to discuss how this allowance can be saved.

Scottish Widows is one of the providers which offers the allowance but Glancy admitted he was not surprised there hasn’t been a massive uptake as the pensions advice allowance is restricted and more specific in what it intends to achieve.

He said: “It costs providers millions of pounds to build and so other providers have probably looked at this and tried to figure out whether there will be demand.”

But he said as long as advisers continue to use providers which do not offer the allowance there will be no incentive for others to change.

Glancy said: “I don’t think financial advisers have seen a lot of demand from clients and if pension providers aren’t in turn seeing demand from IFAs then providers will not build it. 

“We are not seeing a lot of advisers steering clear of organisations that don’t offer the pensions advice allowance. Those providers are still picking up business and are doing well so there is little incentive to build the pensions advice allowance at the moment.”

But Morris said offering this allowance was a “no-brainer” and said it was something he has talked to his clients about previously.

He said: “In terms of why savers should use it, it is quite simple. A lot of people feel as though financial advice is out of reach and if we said we will charge £500 for advice up front I think most people would wince at that in terms of the general public. People who have financial advice understand more of what is involved and what the fees are for.”

To listen to the full podcast click play on the player above. FTAdviser's podcasts are also available on Apple Podcasts, Spotify, Stitcher and Acast.