M&G Prudential has reversed its decision to stop clients moving into drawdown after IFAs complained about the closure of its Flexible Retirement Plan.
Last month Prudential announced it was closing the Flexible Retirement Plan to new adviser business from 17 September. A document seen by New Model Adviser® said advisers would not be able to set up a new drawdown policy with the product's existing funds. At the time a spokesman for Prudential said clients who wanted to move into drawdown ‘can talk to their advisers and switch into the Prudential Retirement Account’.
Following the announcement, New Model Adviser® understands Prudential received a number of complaints from advisers who were unhappy with the product closure.
One adviser, who did not wish to be named, told New Model Adviser® he was unhappy as one of his clients in the Flexible Retirement Plan was about to move into drawdown but would have to receive advice about which alternative drawdown policy to move to.
This advice would involve a suitability report thatthe client would have to pay for, otherwise the adviser would have to absorb the cost themselves. This would be much more costly than a drawdown conversion, the adviser said.
New Model Adviser® understands a number of advisers complained to the provider about this issue and some even asked Prudential to cover the cost of the advice.
However, a spokesman for Prudential confirmed the provider has now reversed the decision to stop clients moving into drawdown within the Flexible Retirement Plan.
‘The Flexible Retirement Plan will still close to new business and top-ups next month. However, where an adviser has a client that has been looking into drawdown, they will still have the option to use the Flexible Retirement Plan drawdown if they feel it is the best option,’ the spokesman said.
This decision to allow clients to move into drawdown within the product was communicated to advisers at the end of last week.
The cost of advice
Nathan Fryer, director of paraplanning firm Plan Works, said if Pru had gone through with the plans to stop clients moving into drawdown in the Flexible Retirement Plan, advisers would have to produce a suitability report in accordance with Cobs 9.4.1 of the Financial Conduct Authority (FCA) handbook.
If the firm was independent, this would have to involve comparing the new drawdown plan with the whole of the market again to make sure an alternative Pru product is the most suitable, Fryer said.
He estimated that to do a personal pension switch for an existing client it costs on average £1,150 in time based on: adviser review of existing scheme and a plan of action (two hours); paraplanner report and research (six hours); meeting and documents signed (one-and-a half hours); processing applications and implementation (one hour).
‘That is my estimate of a very broad pricing structure based on the paraplanner, admin and advice,’ he said.