Royal London has welcomed the government's changes to the price cap for Sandler products as evidence that it has been listening to the concerns of the long-term savings industry.
However, the company has serious concerns that the outcome is a missed opportunity to encourage the distribution of products more widely to the original target market the less well off.
Royal London believes that the charge structure, with an annual management charge alone, will still not cover the cost of proper financial advice, which is essential to all consumers.
Gareth Evans, head of corporate affairs for Royal London, says: “The need for advice applies to everyone, from high net worth individuals seeking to optimise their tax position to average and below-average earners concerned about how their savings decisions will affect their eligibility for means-tested benefits.
“The price cap even at 1.5% – does not allow firms to cover the cost of up front, in depth advice to all. Without individual advice there is the clear danger of unsuitable products being bought. That is why we strongly supported a better shape of charging structure, such as an upfront charge to cover the cost of advice and a 1% or lower annual charge.”
Evans adds: “We have mixed views about the announcement. While we recognise that the government has responded positively to the arguments which were put forward during consultation, we do not believe the outcome will make a significant difference in developing pensions or other long-term savings.”
During the consultation process Royal London had said that any flat rate annual management charge on its own would limit the effectiveness of the model, because it would take many years for companies to recoup the set-up charges of the products. As well as the limited scope to provide advice, there would also be significant commercial risk of financial loss if contracts were discontinued early.
Royal London had proposed an additional set-up charge for Sandler products. With this additional charge, the annual management charge could have been set below 1% so ensuring the products offered good value to customers.