The UK financial services giant is rolling out a new advisory service - and has bought a business to drive the move - to tap expected demand for help over new pension saving freedoms.

One of the UK’s biggest financial institutions, Standard Life, is rolling out a restricted financial advisory business to tap into what is expected to be a surge of demand for help over new freedoms to control money in pension schemes. As part of the drive, it has also bought the UK firm Pearson Jones from its owner, Skipton Building Society.

From the start of April, people holding defined contribution retirement savings schemes will, from the age of 55, be able to take this money out and won’t be forced to buy annuities to provide for their old age. (Annuities are, due to high bond prices, expensive and widely considered to be poor value.) People can, if they receive professional advice, also move funds from defined benefit pensions and turn them in defined contribution schemes. The government has also changed inheritance rules so that people can pass on pension savings without the current punitive tax rate of up to 55 per cent. Wealth industry figures predict tens of billions of pounds could be reallocated into new investments – creating a potential bonanza for wealth managers. Less benignly, such a change could tempt people into unwise savings or, worse, improvident spending.

To meet a possible gap in advice for such a change, UK-listed Standard Life said it is “building our own UK-wide advice service, delivered face-to-face, on the phone and through digital services. It will integrate with Standard Life’s existing workplace and direct services by providing a natural next step for customers with needs that can no longer entirely be met through self-service or guidance”.

The firm said: “Today, more than half of the mass-affluent people in work approaching retirement enjoy the certainty of income provided through a defined benefit pension scheme. And, until recently, the remainder had few flexible alternatives to the certainty of annuities. Both factors have limited the need for advice. Freedom and choice in pensions and the rise of defined contribution arrangements have replaced this certainty with flexibility, creating a generation of individuals that will see advice as an essential service. This means demand for advice is likely to significantly exceed supply.

“The new business will build on the advice and guidance capabilities Standard Life already deploys on the phone and online.  Through the creation of a new academy, the business will also be active in recruiting and training people for a career in financial advice,” it continued.

Steve Murray, managing director of advice, strategy and and strategic investments, will lead the enlarged advisory business in his role as chief executive.

Separately, Standard Life said it had entered into an agreement with Skipton Building Society to purchase Pearson Jones, which is anticipated to bring assets under advice of £1.1 billion ($1.69 billion). Pearson Jones has served customers in the North of England for more than 40 years and has 39 advisors and paraplanners in a team of 102 employees.    

Last year, UK finance minister George Osborne announced that from 27 March 2015, people aged 55 and over will only pay their marginal rate of income tax on anything they withdraw from their defined contribution pension – either zero per cent, 20 per cent, 40 per cent or 45 per cent. Changes, taking effect from 27 March, mean 400,000 more people will have the freedom to access their savings more flexibly in the 2014-15 financial year. From April, the 320,000 people retiring each year with a DC pension can have “complete choice” over how to access their pension.

From April, individuals with a drawdown arrangement or with uncrystallised pension funds will be able to nominate a beneficiary to pass their pension to if they die. If the individual dies before they reach the age of 75, they will be able to give their remaining defined contribution pension to anyone as a lump sum completely tax free. The nominated beneficiary will be able to access the pension funds flexibly, at any age, and pay tax at their marginal rate of income tax.

At the end of September 2014 Standard Life had total assets under administration of over £290 billion.