A year since the pension advice allowance came into existence, major providers are all seeing little or no interest in the measure that was designed to give more people the benefit of advice.
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.
Many large pension providers do not offer the allowance at all - though Scottish Widows has said it will shortly join the small ranks of those that do.
Even among the providers that offer the measure though there has been little interest from the public, though also no real effort to advertise or market the scheme.
Peter Glancy, head of policy development at Scottish Widows, said the company was offering the allowance despite a lack of demand, rather than because of an overwhelming surge in interest.
He said: "We are working towards introducing functionality to offer the new pension advice allowance in the first half of 2018. It will be available across our current range of individual and workplace pensions.
"Until then, customers can continue to fund the payment of advice using existing adviser charging functionality introduced at the time of the Retail Distribution Review.
"We still see very little demand for this service and do not expect to see any significant increase in the immediate future."
Finding out exactly how much the allowance has been used has proved difficult, since the rules which introduced the tax-free measure did not include a reporting requirement to HM Revenue & Customs to avoid placing more burdens on businesses.
When the scheme was introduced HM Treasury also said it would be the responsibility of product providers to publicise the scheme, but these companies have shied away from doing so.
Prudential, Royal London, Aegon and Aviva are among those who do not offer the allowance, while LV and Standard Life do offer it though many of these companies have said demand for cash to pay for advice in this way has been minimal.
A spokesman for Prudential said: "Prudential supports the principles of the pension advice allowance, and we have investigated making this available.
"However, because there has been minimal demand from consumers, and the allowance 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."
But Steven Cameron, pensions director at Aegon, said there had been an up-tick in interest as the year had progressed.
He said: "While demand is still fairly limited, we have noted that where adviser charging is not available there is growing awareness of the allowance and we are now reviewing whether to make this available.
"The downside of allowance compared to adviser charging is it is limited to £500 on up to three occasions. We would like to see the limit increased to £750.
"While adviser charging is not subject to limits, it can only be used to pay for advice solely in connection with the pension plan.
"Ideally, we would like to see current adviser charging rules relaxed to allow it to pay for broader retirement advice, removing current complexities and representing the best of both worlds."
Martin Bamford, chartered financial planner with Informed Choice, said: "It is not an allowance we have had cause to use since its introduction.
"Our work is primarily financial planning led, so considering a client's overall financial situations and goals, rather than providing retirement income advice in isolation.
"In any case, the fees we charge for financial planning are upwards of £5,000, so a £500 tax-free allowance, if facilitated by a provider, would only make a very small contribution towards this total cost.
"I think regulators and policy setters need to get real about the level of fees for financial advice. The rising burden of regulatory costs combined with very high costs for running a financial planning business mean that a £500 allowance is in no way reflective of the reality of what it costs to provide regulated advice."
damian.fantato@ft.com
