Aifa demands clarity on personal accounts

Aifa is raising the issue of the potential for advisory paralysis because of the risk of retrospective action in the run-up to the introduction of personal accounts.

The adviser body is speaking to the Department for Work and Pensions and the Financial Services Authority about establishing clarification on how pension advisers should operate in the years running up to the planned establishment of a National Pension Saving Scheme in 2012.

Advisers and providers are keen to avoid a repeat of the countdown to stakeholder pensions, when the confused introduction of RU64 caused financial planning blight.

The publication of the Pensions Bill in November is expected to clarify the Government’s position on personal accounts and could give a clearer picture of how the state-backed scheme will work.

Once greater detail as to the operation and cost margins for personal accounts is given, the regulator could make the state system a benchmark for good advice for low earners, although pension industry representatives argue advisers should still be free to recommend plans with the added service and investment flexibility of private sector arrangements.

Aifa is expected to make its understanding of the current position clear as part of its ‘stakes in the ground’ initiative, which aims to protect advisers in the event of future complaints.

Fay Goddard, deputy director general of Aifa, says: “We are aware that some of our members have expressed nervousness about advising on pensions without regulatory clarity and whether they should advise Isas instead of pensions in the run-up to personal accounts.

“We do not want to see paralysis in the workplace and will be providing information on how best advice will be given.”

Chris Bellers, pensions technical manager at Friends Provident, says: “Advisers are concerned that the FSA will put in place an RU64-style rule.

“At the moment the detail on the NPSS is vague and it is difficult to know what a personal account-friendly plan is. Whatever happens, we don’t want a rerun of the confusion over RU64, which required several guidance statements from the ABI before anybody knew where they stood.”