Royal London calls for 'cost-effective' pension regime

Yesterday, George Osborne revealed that over 60,000 people have made use of the pension freedoms, transferring over £1bn out of their pension funds since April.

Osborne said:

“These unprecedented pension freedoms have been widely welcomed.

“It is a sign that this is a real success, but we have to make sure that people get the best advice, that the market responds and that companies up their game in helping customers make use of these freedoms.

“We will be watching these things very carefully.”

However Phil Loney said:

“For two years Royal London has been calling on the Government and the Financial Conduct Authority to deliver an advice regime that meets the needs of mid-market savers who typically have medium sized pension pots. Since “Pensions Freedoms” became a reality in April the need for such an advice regime has intensified, but neither government nor the regulator have acted to decisively resolve this problem.

Loney added that Royal London, along with other pension providers, have complied with the legal requirement to ensure that customers with safeguarded benefits, such as guaranteed annuity rates, and a pension pot worth at least £30,000 take advice before giving up these valuable benefits. But he said that it is clear that access affordable advice is a real issue for customers across the UK.

Phil Loney continued:

"Customers are having problems finding an adviser offering advice on pension pots of this size and funding the cost of that advice. So we are calling on the Government and the FCA to give immediate priority to delivering an advice regime that is affordable for these customers and commercially viable for advisers.

"We appreciate that customers want their money. However, the safeguarded benefits available under some pension schemes are very valuable, with guaranteed annuity rates reaching up to 11% compared with current average rates of around 4%. This is why we support the regulator’s requirement that customers should discuss their decision to give up these benefits with an adviser, before making their final decision.

“However many savers with medium sized pension pots are finding it hard to find advisers offering this form of advice. We also appreciate that advisers need to have an advice regime in place that is commercially viable. The only option is for the FCA or government to rise to the challenge and make advice on pension freedoms affordable for all customers."