Government should task the Financial Conduct Authority and Financial Ombudsman Service with developing a new form of advice for those coming up to retirement and not leave it to providers to deliver this service, Royal London has said.
The government is currently consulting on a “new duty” on pension providers and schemes to deliver a “guidance guarantee” by April 2015, following the chancellor’s radical announcement in the Budget that “no one will have to buy an annuity”.
Its consultation reiterated that consumers need to be able to “make informed decisions” and therefore it “guarantees” that individuals approaching retirement will receive “free and impartial face-to-face guidance to help them make the choices that best suit their needs”.
It will fall on providers to ensure that all individuals with a DC pension in the UK and approaching retirement will be offered guidance at the point of retirement. Chancellor George Osborne also announced £20m over the next two years to develop this new “right to advice”.
Phil Loney, group chief executive of Royal London, described the chancellor’s ‘guidance’ comments as “bold”, and “one that is entirely necessary as access to advice is vital in a retirement market where the choices available to savers in DC pension expanded to a dizzying degree”.
However he lamented that since the chancellors’ speech the promise of advice has been rapidly “watered down” from ‘guidance’ to a ‘conversation’ - and broke ranks with the industry and its trade association by warning that providers should not deliver what must be an impartial service.
He said: “This is far too timid an option to achieve the chancellor’s vision for the market.We have seen the impact that ‘guidance’ has on the annuity market. People approaching retirement have been given guidance to shop around and engage with the annuity market for the best deals.
“In the reality most people faced with the complexity of annuity purchase accept the deal they are offered. Those with access to good quality advice on the other hand end up with the best plans that really suit their needs.
“This was the challenge that the chancellor put to the industry in his Budget speech; an advice service for all who are retiring. The responses so far are lacking all ambition.
“What we really need is industry, FCA and Fos to come together to develop a new form of advice which is fit for purpose for customers looking to maximise their retirement income by taking advantage of the freedoms announced in the Budget.
“The new regime must be cost effective and inspire consumer confidence. This can only be delivered if it is impartial and free from product provider influence.”
