RegulationApr 24 2014

PFS proposes to redistribute fines for retirement advice

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by

The announcement of free face-to-face guidance on at-retirement options has prompted calls from many parts of the industry to ensure that it is not product providers that run the service.

The Personal Finance Society (PFS) has suggested that, rather than one-off retirement advice, the government should instead redistribute regulatory fines in order to offer a more general advice service. Following the announcement in the Budget, PFS chief executive Keith Richards has outlined a number of approaches to delivering the service that George Osborne promised.

Mr Richards suggested “developing an industry-led initiative sponsored by the government, which would provide access to advice for everyone via a voucher system.” He argued these could be funded by a redistribution of regulatory fines, referencing the Treasury’s decision to donate Libor fines to charities for injured armed services personnel.

Mr Richards believes higher overall standards of education need to be in place for at-retirement advice to make a real difference, and that the government should implement generic leaflets and web-based offerings. This would be “more of a filter into guidance” which would allow savers to understand the key considerations leading up to, and at retirement.

Having a pension advisory service funded by regulatory fines would help to prevent it from any bias that could come from funding by providers.

Royal London, on the other hand, has said that the government should defer responsibility for creating the retirement advice service to the FCA and the Financial Ombudsman Service, and that it is not appropriate for providers to facilitate this service. Phil Loney, group chief executive of Royal London, said, “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.”

Some advisers believe that those receiving the advice should have the costs built into the solution they choose. “Whether or not the providers physically provide the cash for at-retirement guidance is irrelevant as the people who will ultimately pay will be savers,” said Andrew Swallow, owner of Swallow Financial Planning. “The answer would seem to be, in the absence of any quaint old system like commission, to load the savings period of the fund, effectively lending the saver the fees for the initial advice and subsequently accruing the fees for the retirement advice.”

bethany.rutter@ft.com