Poorest pensioners to be spared fees for advice on transfer option
PENSIONERS with the smallest savings pots will no longer have to pay for advice to transfer out of their scheme, the Government has announced.
Rules which will be laid out in Parliament today will exempt thousands of people from advice fees which can reach more than £1,000. Savers with “guaranteed annuity rate” pensions worth less than £30,000 will be given a simple valuation of their pension and will be able to transfer out without receiving advice. The Government estimates the change will save 12,000 people a year around £900 each.
Around 1.5 million savers have the “guaranteed annuity rates” in their pensions, which normally means they receive a much higher amount each year than they would with annuities calculated based on current rates. Those with more than £30,000 in one of these pensions must receive advice if they want to use pension freedoms to unlock their cash. But a lack of information from providers meant many with smaller pots were also being forced to take advice to find out what their pensions could be worth.
The new rules mean all holders will receive a document setting out one figure for the cash value of their pension, as well as information about the benefits they would give up by transferring out. The “personalised risk warnings” will be short documents sent by providers to their customers. Those with larger pensions will also receive the documents but will still have to take advice if they decide to transfer out.
The Department for Work and Pensions (DWP) said it aimed to give holders more control over their savings. Guy Opperman, Minister for Pensions and Financial Inclusion, said: “The steps we are taking today will empower savers to take control of their options while still receiving the right level of information from their providers.”
But experts warned savers needed more information to make an informed decision. The new documents will not set out the projected overall value of the pension that the holder will be giving up by transferring out.
Alistair Cunningham, a financial adviser, said: “You shouldn’t need to get advice if the paperwork from providers was sufficiently clear. There are three values which should be made clear – the current value, the transfer value, and the value assuming the guarantees apply – which would be the open market cost of buying those benefits now.”
A DWP spokesman said the documents would be “very clear” on what the pension-holder was giving up, but could not say exactly what information the document would include.