Advisers have warned of the flaws in a proposal in the Financial Advice Market Review (FMAR) final report which suggested savers should be allowed to dip into their pension pot to pay for advice from IFA.
The report, published on 14 March, suggested that one way of ensuring more people received pensions advice was to allow consumers to access a “small part” of their pot to redeem against the cost of advice before the normal retirement age.
A director a financial advising firm said this would not be a dramatic change but more of a “psychological prod” to pension savers to seek advice “without the fear of having to write a cheque the moment they speak to an advisor”.
Tony Catt, compliance officer at Anthony Catt, echoed this , saying the initiative would probably be popular among customers who would prefer to withdraw from their policy rather than having their pockets take an immediate hit.
He said “Often pension’s advice should be fairly basic so the costs shouldn’t be that great. Most customers would rather it came out of their pension, because they won’t notice the money come out, and so it won’t seem like they are really paying”.
“But it is difficult to see how it would reasonably be taken out of their tax-free cash”. He suggested that the knock-on effects of taking it out of people’s pension were “quite considerable”, so the initiative would be a bad move. “It’s an acknowledgement that advisers need to be paid for their time but when it comes down to representing good value for money, I don’t think it does.”
(FTAdviser, March 2016, Katherine Denham)
IFA/ Financial Advice Bristol
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