Mainstream pension providers are not offering their customers the chance to benefit from the tax-free £500 pension advice allowance because of “little demand”, they have said.
Of the providers that are not offering the allowance, four said low demand from customers made the necessary changes to offer the scheme a low priority for them.
According to an article in the Financial Times on the weekend Aviva, Aegon, Fidelity, Legal and General, Prudential and Royal London are not offering the tax break, although some offer their customers access to HMRC’s “adviser charging” facility.
However Legal and General told Retirement Planner‘s sister title Professional Adviser they were able to facilitate pensions advice allowance requests. Prudential, Royal London and Aegon all told the FT that there was low demand from customers for the allowance, which was why they had yet to offer the service, with Prudential suggesting it was “complicated to administer”.
Meanwhile Fidelity told to Professional Adviser: “Fidelity does not currently offer the pensions advice allowance on its DC pension schemes. We have never paid advice fees or commission on these products and would therefore need to develop a capability if we were to offer this.
“While we support the concept we have seen little demand for it as yet and so have not prioritised the systems and operational development needed for it.”
Adviser charging allows advisers to accept payments from a registered pension scheme if it is associated with the suitability of fund choice, asset allocation, pension provider, pension taxation or checking against statutory limits.
The pension advice allowance – an idea first floated in the 2016 Budget – on the other hand, allows people to withdraw up to £500 from their pension pots tax-free to put towards the costs of pension and retirement advice.
The rules allow savers to make up to three £500 withdrawals in separate years, meaning they can access £1,500 tax-free. The scheme has been live since 6 April 2017.
Aviva said it used the existing adviser charging system, however admitted “some customers will need to transfer to another product” to access it. It told Professional Adviser it planned to monitor the market, and that if demand grew it would “review” its position.
‘Combine the two’
Since the article was published on Sunday, Aegon has called on the Treasury and Financial Conduct Authority (FCA) to collaborate by bringing the best of adviser charging and pension advice allowance together.
Pensions director Steven Cameron pointed to a key difference between the two, which meant adviser charging could be used to fund advice only on the pension from which it is deducted, whereas the pensions advice allowance could be used to fund broader retirement planning with a three times £500 limit.
Cameron said: “We believe the treasury, FCA and HMRC should work together to combine the best of adviser charging and the pension advice allowance. Allowing adviser charging to fund on broader retirement planning would be a major step forward for pension savers.”
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