Question
I wonder whether how many other CM users have received the letter dated October 2012 from NFU Mutual stating that the current NFU With Profits Personal Pension Plan will close to new subscribers as from 31 Dec 12, and that existing subscribers will be limited to making regular payments at the level as at 31 Dec and that there will in future be no facilities for increasing or restarting regular payments or making lump sum contributions.
The first paragraph of the letter (from Tim McKeon Head of Life Services) states: 'The changes are necessary because the FSA has introduced new rules, as part of the Retail Distribution Review, that affect the way in which the Plan will operate in the future'.
I wonder if there are others who share my disappointment at what seem to be fairly drastic and draconian changes to a Plan, which otherwise appears to conform to a fairly standard pension plan model, at rather short notice, bearing in mind that most personal pension plan subscribers will probably want to stay in a scheme and use the facilities for 20 - 40 years.
If anyone can shed any light on why NFU Mutual have chosen to do this, I would be grateful for enlightenment. I should add that my family and I have similar personal pension plans with four other providers, none of which have so far made changes to these other plans, as a result of RDR. Answer
Sorry for the slow reply, been waiting on an answer from NFU which I've now finally received.
The issue here is the sales commissions currently built into the NFU Personal Pension Plan, used to pay for advice. The FSA's Retail Distribution Review will ban such commissions from 31 December 2012 for new advised sales, meaning the NFU pension will no longer be allowed in its current form if you want to restart or make additional contributions over and above your regular amount.
Under the new rules advisers will have to be paid via explicit fees, either charged directly to you or taken from the product with your permission - the latter is typically referred to as 'adviser charging'.
Most financial providers have already adapted or will adapt their existing product range to facilitate adviser charging, but in NFU's case they've decided to launch a new personal pension with this facility instead. So should you wish to increase/restart your NFU pension contributions from next year you'll have to either use the new pension or take your custom elsewhere to another provider.
I can see this proving an annoyance for some existing customers and it remains to be seen how the new pension charges will stack up against the existing, including the cost of advice (you may or may not be receiving). But provided charges don't increase and your eventual with-profits final bonus ends up being unaffected (i.e. the amount aggregated across the two plans is no different to all your money being in the one existing plan) then there doesn't seem any reason to be concerned.
For your information, here's NFU's response:
"RDR requires us to charge explicitly for advice. We believe that many of our customers will want to pay their advice charges from within their pension plans and this will require changes to our systems. The cost of the change in relation to the With-Profits Personal Pension Plan is judged to be uneconomic, given the number of policies we have sold and are likely to sell in future.
We have therefore developed a new pension plan for launch on 31st December 2012 to enable us to include the option to pay advice charges from the plan. This new plan includes With-Profits as well as a wider selection of investment-linked funds.
Consequently, we have decided not to amend the current With-Profits Personal Pension Plan but to allow existing customers to maintain their current contributions and to make available an improved pension plan for new customers and to enable existing customers to make additional contributions."
I wonder whether how many other CM users have received the letter dated October 2012 from NFU Mutual stating that the current NFU With Profits Personal Pension Plan will close to new subscribers as from 31 Dec 12, and that existing subscribers will be limited to making regular payments at the level as at 31 Dec and that there will in future be no facilities for increasing or restarting regular payments or making lump sum contributions.
The first paragraph of the letter (from Tim McKeon Head of Life Services) states: 'The changes are necessary because the FSA has introduced new rules, as part of the Retail Distribution Review, that affect the way in which the Plan will operate in the future'.
I wonder if there are others who share my disappointment at what seem to be fairly drastic and draconian changes to a Plan, which otherwise appears to conform to a fairly standard pension plan model, at rather short notice, bearing in mind that most personal pension plan subscribers will probably want to stay in a scheme and use the facilities for 20 - 40 years.
If anyone can shed any light on why NFU Mutual have chosen to do this, I would be grateful for enlightenment. I should add that my family and I have similar personal pension plans with four other providers, none of which have so far made changes to these other plans, as a result of RDR. Answer
Sorry for the slow reply, been waiting on an answer from NFU which I've now finally received.
The issue here is the sales commissions currently built into the NFU Personal Pension Plan, used to pay for advice. The FSA's Retail Distribution Review will ban such commissions from 31 December 2012 for new advised sales, meaning the NFU pension will no longer be allowed in its current form if you want to restart or make additional contributions over and above your regular amount.
Under the new rules advisers will have to be paid via explicit fees, either charged directly to you or taken from the product with your permission - the latter is typically referred to as 'adviser charging'.
Most financial providers have already adapted or will adapt their existing product range to facilitate adviser charging, but in NFU's case they've decided to launch a new personal pension with this facility instead. So should you wish to increase/restart your NFU pension contributions from next year you'll have to either use the new pension or take your custom elsewhere to another provider.
I can see this proving an annoyance for some existing customers and it remains to be seen how the new pension charges will stack up against the existing, including the cost of advice (you may or may not be receiving). But provided charges don't increase and your eventual with-profits final bonus ends up being unaffected (i.e. the amount aggregated across the two plans is no different to all your money being in the one existing plan) then there doesn't seem any reason to be concerned.
For your information, here's NFU's response:
"RDR requires us to charge explicitly for advice. We believe that many of our customers will want to pay their advice charges from within their pension plans and this will require changes to our systems. The cost of the change in relation to the With-Profits Personal Pension Plan is judged to be uneconomic, given the number of policies we have sold and are likely to sell in future.
We have therefore developed a new pension plan for launch on 31st December 2012 to enable us to include the option to pay advice charges from the plan. This new plan includes With-Profits as well as a wider selection of investment-linked funds.
Consequently, we have decided not to amend the current With-Profits Personal Pension Plan but to allow existing customers to maintain their current contributions and to make available an improved pension plan for new customers and to enable existing customers to make additional contributions."
Read this Q and A at http://www.candidmoney.com/askjustin/771/nfu-with-profits-pension-change
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