Customers with smaller pension pots with GAR benefits, who will still be required to get financial advice, could have been helped by reforms, Royal London said.
The Department for Work and Pensions announced, this week it would amend the Pension Schemes Act 2015.
The changes mean that for the purposes of the advice requirement, providers should “treat the value of safeguarded benefits, including those with a GAR, as equal to the actual transfer payment to which the member would have a statutory right in respect of those benefits”.
Gareth Evans, head of corporate affairs at Royal London, said that “an opportunity has been lost to help those customers with smaller pension pots with GAR benefits, who will still be required to get financial advice.”
Since the introduction of pension freedoms in April 2015, scheme members with safeguarded pension benefits worth over £30,000 under a scheme, including benefits with a GAR, have been required to take independent financial advice.
They must do so before transferring their pension savings to another provider to obtain flexible benefits, converting their benefits into flexible benefits within their scheme, or accessing their pension savings flexibly.
The current calculation method for valuing safeguarded benefits to determine whether they exceed the £30,000 threshold had been causing ‘difficulties’ for providers and members in its application to pension benefits, which contain a GAR, triggering the Government to review the position.
The change so that the £30,000 advice threshold is equal to the transfer payment is welcomed, Mr Evans said, as this will make it easier for consumers to understand when independent financial advice is required.
He said: “The requirement for customers with GARs benefits to receive personalised illustrations that give an indication of what the GAR benefits may provide and the strengthening of the risk warnings, will help to improve understanding of the value of the benefits they have.
“But they will still face the frustration and difficulties that many consumers experience in obtaining the necessary advice, before they can access their savings.”
Royal London previously called for customers with smaller pension pots, for example £20,000 - £40,000, to speak with Pension Wise before being allowed to transfer or flexibly access these benefits.
Mr Evans said: “We believe this would help to address the concerns around the perceived high cost of advice in relation to the size of the customers pension pot.
“Hopefully we will see changes announced soon in response to the Financial Advice Market Review that will provide wider solutions for more consumers to have cost-effect access to impartial advice.”