RDR will increase consumer trust and flexibility, Hoban
MPs and the leader of the Financial Services Authority have responded to an open letter which argued that less well-off people will be alienated from financial advice in the wake of the Retail Distribution Review.
Co-signed by Mark Hoban, financial secretary to the Treasury; Steve Webb, minister of state for pensions; and Adair Turner, chairman of the FSA, the letter points out that the Association of British Insurers has introduced a new code of practice for its members, under which annuity providers must encourage people to shop around on the open market, and make the process clearer for consumers.
In early March, 17 signatories sent an open letter to the three calling for a ‘retirement income summit’ to discuss how to best serve the poorest and least healthy pensioners. Signatories included Dame Anne Begg, chair of the Work and Pensions select committee; Clive Bolton, retirement director at Aviva; and Jonathan Evans, chair of the All Party Parliamentary Group on insurance and financial services.
Although Mr Hoban, Mr Webb and Lord Turner say this will help people find better retirement deals, their letter of response goes on to say “it is clear that there will remain a significant number of people for whom it is uneconomic to seek financial advice”. According to the letter, the Money Advice Service will fill this role.
The letter said: “Tackling the enduring myth that advice is free is a key part of the RDR, and increased transparency around commission and costs will help consumers trust the sector to help them make informed decisions about their finances.
“The introduction of adviser charging will empower consumers to decide the level of service that best meets their budget and needs. This flexibility will keep financial advice within the reach of those who want it.”
Regarding small pension pots specifically, the signatories pointed to the government announcement in December to allow holders of small pension pots to take up to two small pots as a lump sum. The Department for Work and Pensions is also consulting on options for dealing with small pots.