The government has listened to the industry by announcing today that the ‘guidance guarantee’ will be delivered by independent organisations, including the Pensions Advisory Service and the Money Advice Service, and will by funded via an industry levy.
Chancellor George Osborne promised in this year’s Budget that from April 2015 a ‘guidance guarantee’ will be introduced. The guarantee promises that people approaching retirement will receive “free and impartial face-to-face guidance to help them make the choices that best suit their needs”.
Mr Osborne said: “The government wants to ensure that guidance is trusted by consumers, and the vast majority, including most of the financial services industry who responded, said that consumers would not trust guidance given by a person or organisation with a vested interest in selling a financial product or service.
“It will bring together a range of delivery partners, including the Pensions Advisory Service and the Money Advice Service, which already provide guidance and support to consumers.”
The ministerial statement added that the government welcomes expressions of interest from a range of trusted consumer-facing organisations, including Citizens Advice and Age UK, and “looks forward to discussing further with these and other independent organisations how they can be involved”.
The Association of Professional Advisers previously said Tpas and Mas were the best organisations to deliver the ‘guidance guarantee’, and the trade body were also of the view that consumers need to decide how they want their ‘guarantee’ delivered, meaning guidance should be available online, by telephone and face-to-face.
The government confirmed today that guidance will be offered through a broad range of channels, including web-based, phone-based as well as face-to-face.
It will remain free to the consumer as it will be funded by a levy on regulated financial services firms.
The National Employment Savings Trust previously proposed that the ‘guidance guarantee’ should be funded by a levy across the financial services sector to make sure those with the smallest pots are not forced to pay disproportionate costs.
Andrew Tully, pensions technical manager at MGM Advantage, previously told FTAdviser the cost may be picked up by an industry levy.
The government made a £20m development fund available to get the initiative up and running.
Today, the Treasury said it has obtained approval for an advance from the Contingencies Fund of £10m, out of the £20m development fund for the guidance guarantee announced at Budget, for preparatory work for the guidance guarantee in advance of Parliament’s approval.
Parliamentary approval for additional resource of £10m for this new expenditure will be sought in a ‘supplementary estimate’ for HM Treasury.
Pending that approval, urgent expenditure estimated at £10m will be met by repayable cash advances from the Contingencies Fund. The repayment is expected to be made in the financial year 2014/15.
Later today, Mr Osborne will give the government’s full response to the consultation.
