Warning new GPP rules could create barriers to saving

FSA plans to include group personal pensions (GPPs) in existing rules regarding pensions advice could create barriers to saving and additional costs to employers, industry figures say.

The regulator made the proposals to mitigate the risk of poor advice being given on workplace pension opt-outs in order to protect people joining pension schemes under auto-enrolment.

Rules around additional contributions, which say advisers must consider arrangements within an existing workplace scheme before recommending alternatives, may also be extended to cover GPPs to protect new savers against churning.

The response to the consultation from the industry has been broadly positive but some still have reservations about the implications for advisers and employers. 

Ian Naismith, head of pensions market development at Scottish Widows, says: "We welcome the FSA consultation. Scottish Widows has consistently said it is essential that rules for group personal pensions and occupational money purchase schemes are consistent, and the proposed changes appear to achieve that."

However, concerns have been raised the new rules may create a barrier to saving.

Neil Gough, client services director at Creative Benefit Solutions, says: "The rules need to be balanced with allowing individuals to retain the ability to access advice on the best options for them.

"The consultation is aimed at reducing the risk of someone being mis-advised to join a GPP and also potentially make the transferring of GPP arrangements more akin to the processes required when moving trust based pensions, which require the involvement of a pension transfer specialist.

"Both of these angles, considered in light of the post-RDR advice world, could lead to people either not joining a scheme which is clearly beneficial to them, or leaving funds in a plan which is ‘worse' than other alternatives subsequently available to them."

Philippa Gee, of Philippa Gee Wealth Management, says the FSA's proposal is "basically a sound move", but adds there may be charging issues for IFAs.

"IFAs will need to factor in the cost of this advice and that will have to come from someone's pocket as employers may find this extra cost uncomfortable," she says.

Tom McPhail, head of pensions research at Hargreaves Lansdown, adds:

"It looks like a welcome development in the recognition of group contract-based arrangements as occupational pension plans.

"It is a logical position, given the widespread usage of GPPs and group SIPPs as workplace savings plans.

"However, GPPs are likely to become increasingly irrelevant as the DC market polarises between NEST on the one hand and Group SIPPs and corporate wrap accounts on the other."