The financial advice hamster wheel

Topic:

Hot topic

Date published:

Monday, 22 August 2016

Author:

Gillian Graham

There are times when I really feel for pension scheme members.

As a trustee secretary, I often hear when someone is struggling to get the guidance and advice they need. I guess they hope I can help in some way but, when it comes to advice or other information the pension trustees cannot provide, I simply can’t. I sense their frustration and fully understand why members sometimes feel they are caught on a hamster wheel going nowhere fast.

Here are a couple of examples…

Bob (not his real name) has an AVC pot held with one of the large insurers. His pot is less than £30,000 but it has a guaranteed annuity rate (GAR), which means the insurer treats it as if it was over £30,000 and requires him to take financial advice. He is fully aware of the issues surrounding the guarantee and still wishes to transfer his pot somewhere else. He doesn’t feel he needs advice and is happy to sign paperwork saying he won’t bring a claim against the insurer later down the line.

Feeling like he was banging his head against a brick wall – made all the more painful because the insurer refuses to speak to members directly – he looked into getting the advice they were insisting on. It has proved virtually impossible to find an IFA prepared to give the advice he needs. Worried it will turn into a mis-selling case, IFAs won’t touch it – including all those he contacted via the website we’re told to point members to find one!

Elsie (not her real name) wanted to access her defined contribution (DC) pension pot spread over two or three tax years. Her employer’s scheme did not permit this so she needed to transfer to a different arrangement. Again, it proved nigh on impossible to get the advice she needed and the only option available was extremely expensive.

Will they be able to step off the wheel?

For Bob there may be, although it is unclear how long he will have to wait for the government’s proposed rule changes to come into effect that may remove the requirement for him to take advice. The amendment may be included in the consultation on draft regulations promised for summer 2016. However, summer is a vague concept at best, and likely to be even more elastic than usual given the Brexit vote and the change of minister!

For Elsie, it seems harder. Until recently you were able to go down the ‘non-advised’ or ‘execution only’ route but these also seem to have almost dried up. However, we found an IFA who came up with a novel solution – a short-term annuity over three years, which still seem to have a non-advised option. It is potentially a valid work around but, in both cases, reality seems to be falling well short of what the government is claiming by way of freedom and choice!

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