Pension savers with ‘guaranteed’ small pots no longer need to pay for advice


The government announced that thousands of pensioner savers with small pots no longer have to pay for advice in order to transfer out of their scheme.

Generally speaking, those with pension pots worth less than £30,000 don’t have to seek advice to transfer their pots, but those with a ‘guaranteed annuity rate’ (GAR) whose pension is worth less than £30,000 did.

The cost of such advice can exceed £1,000, and according to government estimates this some 12,000 people are affected each year.

Under the new rules, those people will instead receive a letter with simple valuation of their pension and will be able to transfer out without receiving advice.

The letter will spell out the cash value of their pension, as well as some information on the benefits they would be giving up by transferring out their scheme. But the government has not specified how comprehensive this information is going to be. The first round of letters is set to be sent out in April 2018.

Minister for pensions and financial inclusion Guy Opperman says: ‘I want everyone to have freedom and choice when it comes to financing their retirement plans and this includes being able to choose whether or not advice is right for them.

‘The steps we are taking today will empower savers to take control of their options whilst still receiving the right level of information from their providers.

‘Financial advice is not a one-size-fits-all industry and I will always be on the side of hard working, responsible savers and anyone looking to have greater choice over their money.’

Kate Smith, head of pensions at Aegon, says: ‘It’s very difficult to calculate the value of a GAR. We wouldn’t be able to put a value on it as such, as a provider.’

Smith says that this is ‘good news because advice might not be something everyone can afford. But as with any sort of safeguarded benefit, advice is still valuable.’

In relation to the letter the government suggests to send out to people, she says: ‘There’s not a lot of detail on that, it’s seems to be just a “risk warning letter”, but we provide that already just with other wording.’

She says the outcome will be that more people will try to transfer, ‘which may or may not be a good outcome depending on their circumstances.’


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