Royal London calls for law change to help consumers access their pensions
19 June 2015
Royal London, the largest mutual life, pensions and investment company in the UK is calling for a change in legislation to help customers seeking to access their savings under the new “Pension Freedom” rules. The call comes in an open letter to the new Pensions Minister, Dr. Ros Altmann.
Currently all savers with a guaranteed annuity rate (GAR) built into their pension fund are required to seek the advice of an FCA authorised adviser before accessing their fund if the fund value exceeds £30,000. Many customers with this type of guarantee have expressed extreme frustration when they have sought to access their money using the Pension Freedom rules that came into effect in April. Qualified advisers charge a fee for their services and many savers with modest savings believe these fees are disproportionate to the funds they want to access.
Some advisers are understandably also unwilling to provide advice to those with modest savings as the fees generated are commercially unviable or the risks associated with advising customers with guarantees are unacceptable especially if the advice is subsequently ignored by the customer.
Royal London is calling for a change in the law so Pension Wise, the free service established just before Pension Freedoms came into force, can provide guidance for customers with guaranteed annuities. Following an appropriate guidance session with Pension Wise, which fully explains the value of the guaranteed annuity, customers with a GAR built into their £30,000+ pension pot would be free to dispense with their pension fund as they wish. The Pension Wise GAR guidance session would be provided free of charge to customers as Pension Wise is funded by an industry levy. Some customers currently report paying £1000+ for regulated advice under the current system.
Fiona Tait, Pensions Specialist at Royal London said:
“When establishing the rules Government sought to protect customers with guarantees in their pension. But it failed to anticipate the extent of pent-up customer demand to access their “own money”. This is creating genuine problems for customers which pension providers cannot address under current rules.
Pension Wise was set up specifically to provide guidance for everyone eligible for Pension Freedoms. It is only right that Pension Wise should be the first port of call for customers including those with guaranteed annuities. Pension Wise have proven expertise in all aspects of pensions and are genuinely impartial. It follows that providers should be able to accept customer requests for pensions encashment if they can prove they have been through the Pension Wise process and understand the implications of giving up guarantees.
It goes without saying that there will be an important role for qualified advisers in the retirement income market but this will be largely for those with more complex needs or with defined benefit pension pots above £30,000 contemplating a transfer to the defined contribution pension regime where advising on the potential transfer is a more specialist skill.”
The open letter to the Pensions Minister can be found here.
For further information please contact:
Gareth Evans 0207 506 6715/ 07919 170069 firstname.lastname@example.org
About Royal London:
Royal London is the largest mutual life, pensions and investment company in the UK, with Group funds under management of £86.3 billion. Group businesses serve around 5.3 million policy holders and employ 2,859 people. (Figures quoted are as at 31 March 2015).
The Group is currently moving all of its UK businesses under a new version of the Royal London brand. The Group's independent wrap platform will remain branded Ascentric.