Towers Watson’s senior DC consultant for global pensions said: “Calling guidance free will not make it free to provide.”
He added that the type and scope of guidance eventually decided upon by the City regulator would ultimately shape the choices savers made. He said: “The way choice is framed could have a huge bearing on how many people cash out their pension savings, buy annuities or stay invested in riskier assets.
“Hundreds of thousands of people will be retiring every year, and a large proportion of them will be going into guidance without their minds made up.”
Mr Aitken said that as many as three-quarters of FTSE 100 employers already offered annuity broking services to help staff shop around for competitive rates. Based on a survey of 90 per cent of FTSE 350 firms by Towers Watson, some 43 per cent offered “countdown to survival” guides, while a third offered pre-counselling sessions.
Mr Aitken added that the proposed guidance regime would only deliver the best value to savers if it helped them take a complete view of their retirement income planning.
He said: “In the short term, there will be a lot of people coming up to retirement with small DC pots, either because they have enrolled very recently, or because they were only ever trying to top up a defined pension.
“Some of these may be able to use their DC pots under the new pension liberalisation rules as a bridge to retirement, while they work part-time and wait for other pensions to start being paid.
“The choices will look very different for people whose DC pensions are expected to meet a large part of their retirement income needs.”
Yesterday (8 April), Otto Thoresen, director general of the Association of British Insurers, told MPs that guidance would only be “free to the consumer in the sense that they won’t be writing out a cheque and it will be paid for...by the industry”.
In giving evidence to the Treasury Select Committee on the impact of the Budget, Mr Thoresen said: “Actually a contract-based scheme ran by insurers is one thing but a trust based scheme will have to find resources and it will be paid for... by the consumer in the end”.
Adviser view
Graeme Mitchell, managing director of Scottish Borders-based Lowland Financial, said: “From the moment I heard these proposals for guidance, I thought that the advisory community should be the ones to deliver the guidance, not the insurers. We already give people free consultations, so it would not be difficult to offer the service.”
