Don't force savers to pay for pensions advice, say insurers

The Telegraph

Hundreds of thousands of people using the pension freedoms may be given the power to bypass a legal requirement to pay for financial advice

More than 500,000 savers who faced compulsory advice charges to cash in their pensions will be allowed free access under plans being considered by officials. 

As the over-55s have tried to to use the new retirement freedoms, many have found the small print of their policies forces them to pay for professional financial advice, which can cost as much as £2,000, before they can access the money. 

Under proposals put forward by the insurance industry yesterday, all savers using the new retirement freedoms would be to able demand "customer control" and access their pot without speaking to an independent adviser. 

The Association of British Insurers has written to the Chancellor and the city regulator to propose new rules. 

It has also called for a "taskforce" to be created to deal "decisively" with issues arising from the freedoms, such as the inability of some customers to access their money as they hoped. 

The action plan follows George Osborne's announcement that a Treasury consultation will be launched next month to ensure people are not charged "excessive" early exit fees and are treated fairly when moving their pension to a company that offers them flexible options to access their savings. 

The letter sent yesterday by ABI chairman Paul Evans and director general Huw Evans said: "While the vast majority of customers so far have successfully exercised their choices without complaint ... this action plan proposes a solution to the problem of customers unable or unwilling to access advice in the circumstances set out in the law." 

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Under the pension freedoms introduced on April 6 savers are supposed to have unrestricted access to their retirement funds from age 55. 

But savers whose contracts assured them of a guaranteed income in retirement - through a so-called "guaranteed annuity rate" - were being forced by Government rules to pay thousands of pounds for advice if their funds were worth more than £30,000. This was because the deals often gave them higher-than-normal lifetime income from an annuity. 

A "customer control mechanism" would allow savers to bypass this requirement, the ABI said. 

Savers would need to call the Government's free Pension Wise service or the Pension Advisory Service to apply. 

dan.hyde@telegraph.co.uk