Most IFAs will look to recommend waiver benefits after changes to pension rules come into force in A...
Most IFAs will look to recommend waiver benefits after changes to pension rules come into force in April 2001.
According to a study undertaken among Swiss Re's panel of IFAs, most were aware of the changes to defined contribution pension arrangements, whereby risk benefits must be set up separately from the pension scheme, but most will continue to recommend waiver benefits in spite of this change.
The research revealed that while 43% of the group were unaware that the scope for waiver benefits will extend to cover redundancy or unemployment as well as incapacity, 71% would look from April to recommend cover against these risks in the future.
Despite this, however, the group maintained they had concerns about redundancy cover in terms of benefit restrictions, expense and non-payment of claims. One member of the group said: "A lot of clients have had or know of someone who has had a claim turned down."
When asked how they would prefer to source the asset accumulation and risk benefit components of a pension, over half said they would prefer to source the elements separately, but a significant number said they were happy to stick with the waiver product offered by the pension provider.
The main reason given to shop around for waiver cover was that providers of investment products are not necessarily strong on risk products. All but one IFA said they would like to see the benefits of these risk products paid directly to the pension provider.
The study concludes that product providers should take advantage of this opportunity to promote waiver products among intermediaries and address the concerns they may have with regard to unemployment insurance.
Ron Wheatcroft, technical manager at Swiss Re, said: "The responses were generally encouraging with most IFAs recommending waiver - this may be partly a consequence of the regulatory framework in which personal pensions are offered. There is also an expectation that cover will be needed from April 2001 onwards but less enthusiasm for extending the scope to other events such as unemployment."
He added: "For providers of unemployment insurance there is still some way to go. There is suspicion about whether unemployment insurers will actually pay claims with concerns about reliance on small print and restrictive cover."
