Implementation costs will no longer incur an unauthorised payment charge under RDR adviser-charging rules after HM Revenue & Customs shifted its stance on the issue.
However, concerns remain about the impact that providing “wider pensions advice” will have on a member’s tax-free cash and how the rules will be applied for consultancy-charging through group schemes.
Earlier this month, Money Marketing, Fundweb’s sister publication, revealed HMRC is planning to rewrite adviser-charging guidelines after insurers raised concerns that including implementation costs would result in a 55% unauthorised payment charge.
A redraft of the guidance, seen by Money Marketing, says implementation fees can now be included in the overall cost of advice and so will not incur an unauthorised payment charge under adviser-charging.
But uncertainty remains over how consultancy-charging, which is not specifically mentioned in the guidelines, will be applied for group schemes.
Robert Reid, managing director of Syndaxi Chartered Financial Planners, says it remains unclear how a consultancy charge can be applied if only a proportion of the employees advised decide to join the pension scheme.
He says: “This redraft has not addressed the real issue on consultancy-charging. If you advise 100 employees on a GPP and only 50 join the scheme, it is not clear that HMRC will find it acceptable to levy joiners for the cost of advice given to non-joiners. If this remains the case, then consultancy-charging simply will not work in practice.”
The redraft also creates a distinction between an adviser charge relating to lifetime annuity advice and a charge relating to “wider pensions advice”, such as drawdown.
Under the proposed rules, a quarter of the costs relating to wider pensions advice would be taken from the client’s tax-free cash while any costs for advice on the lifetime annuity would only be taken from the member’s remaining fund.
Reid says: “This almost puts an IFA off looking at the total range of things available at retirement. On the one hand, we have pressure from the FSA [Financial Services Authority] to consider all the options for clients but if we do that, it will have a direct impact on the individual’s tax-free cash.”
An HMRC spokesman says: “The draft guidance was sent to the ABI for review and we are currently considering its comments.
“We are expecting to make some changes to the draft guidance as a result of the helpful feedback we have received.
“HMRC will consider as a separate matter whether guidance is needed about commercial payments for consultancy-charging by a non-occupational scheme not normally being regarded as unauthorised payments made to or in respect of the member.”