I fear the blog I published over the weekend on logging your LOA may prove my “least read” article ever. If you are one of the 62 who have read it – thanks, if you weren’t – here’s my second go!
I return to the subject with trepidation and from a different perspective. hoping this try will encourage some of my readers to attend this morning’s Pension PlayPen coffee morning, a free-link to which is available at the bottom of the page
The problem is this. Millions of people have pension pots that once found, prove hard to understand and harder still to combine with other pots.
To help them understand what they have and whether the pot is offering value for money, authority to provide information to an adviser or expert analyst has to be granted. This grant has to be via a letter of authority issued by the pot-holder to the administrators who hold the pot – often via trustees or a life company.
Letters of authority (LOAs) have been a headache for providers, advisers and administrators for years. But the people who are most frustrated by failures to get the LOA process right are the people signing them – the people trying to find out what is going on with their money. They often have to wait months for the authority to be actioned and for them to be in a position to take a decision on whether to combine pots (and how).
This frustration leads to dis-engagement with pensions and a reinforcement of a commonly held view that pensions are just “too-hard”. The LOA process is too hard, too slow and badly in need of innovation,
Here are a few questions I want answering when I attend this morning’s session run by Scott
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Why is the LOA process so slow?
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Why can a bank process information within seconds when pension companies take weeks?
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What are inefficient LOAs doing to the price and viability of financial advice?
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Will the pension dashboards make a difference or will they get caught in the same wet cement?
This is not a local issue to IFAs, it impacts the confidence that everyday people have in managing their own pension affairs.
If people cannot give third parties authority to act on their behalf , they will have to go it alone. Going it alone leads to yellow and red flags as people try to execute their own transfer deals without advice.
The LOA headaches are only the start of a long and complicated process that is putting people off pensions and leading to the kind of comments that regularly appear on websites such as moneysaving expert , Mumsnet and Money mail.
If we are ever to democratise advice to the mass market, we must sort out the blockages that make advice expensive, inaccessible and hard.
Which is why paying attention to the nitty-gritty is important
Scott is running a campaign called “log your LOA pain” and is calling on Advisers, IFA’s and pension companies to come together, gather data, experiences and flush out solutions.
Once we have sorted out the problems of today , we can look forward to solutions of the future. The pension dashboard will have to wait, we can’t wait to sort out LOAs, any longer.
The number of advisers have declined dramatically since 1988. The risk reward equation will mean more consolidation of the IFA market so 6% is destined to decline further.
The 6% who we are told take advice are not complaining about LOAs. IFAs have settled into serving those that appreciate the service given.
It is the 94% where you will find the “Victor Mildrew effect” and constant moaning eventually falls on deaf ears.
Plainly if you pay peanuts you get monkeys.
Your campaign needs a solution presented we all know that pension provision is inadequate AgeWage identifies the half of the distribution curve that makes the top half possible but where is the call for action that pays the bills.
Your campaign needs to segment the market and present solutions for each quartile.
You do not improve the lot of the poor by damaging the successful.
Why not consolidate at the provider level and raise the capital adequacy of the provider encourage consolidation and concentrate the dashboard obligation between 10 providers for the 94% who do not take advice. It could be that the industry is looking through the wrong end of the telescope at the issues
I recently tried to consolidate a £43k pension comprising monies contracted out of SERPS into a scheme I have with a large pension fund. The large fund refused point blank to do it unless I took advice. The contracted out pension is a with profits cash balance scheme. My understanding is this is the sort of advice IFAs are reluctant to give because of PI issues. What advice are they going to give me for a four figure sum? I already know I will be foregoing annual increase guarantees of 4.5% to gamble the money in equities funds with no guarantees hoping to get 7% per annum. I have had to transfer the monies from the with profits fund into the money purchase fund with the small provider who offers limited fund choices. No doubt I should have done this years ago. When I went into the with profits fund in 1988 I was expecting it to be adventurously invested. What I have ended up with is a lacklustre quasi bond fund. Who wants to be invested in such a product over the long term? I didn’t.