PensionsJul 24 2014

Advisers set to fund guaranteed guidance

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

The guaranteed guidance on pension choices will be provided by independent organisations rather than pension scheme providers, and will be funded by a levy on regulated financial services firms, the government has announced.

Chancellor George Osborne said the guidance would be delivered by organisations including the Pensions Advisory Service and the Money Advice Service.

Mr Osborne said, “everyone with defined contribution pension savings reaching pension age will get free and impartial guidance on their range of available choices at retirement.”

It was first announced in the Budget, but unlike the scenario first indicated, the guidance will not always be face-to-face. It will also be offered through a range of channels, including web- and phone-based options, and will remain free to the customer.

From next April, savers will be able to use their pension money as they please from the age of 55. Additionally, the government announced that transfers from private sector defined benefit to defined contribution schemes to take advantage of the new flexibilities will be allowed - but with a requirement that regulated advice is taken by the member prior to any transfer.

But what remains unclear at the moment is how advice firms will be footing the bill.

Yvonne Goodwin, director of Leeds-based Yvonne Goodwin Wealth Management, said, “It’s not going to be me who is paying for it - it’s our clients and their fees. I asked some clients what they thought about paying for other people’s guidance and they said it is not very fair.”

But Jamie Smith-Thompson, managing director of pensions specialist advisers Portal Financial, said, “Ultimately, I think it could benefit advisers in a strange way. What it could do is highlight how many different options a client has. Having worked in financial services for many years, I know that the more options you give, the more difficult it is for the end client to choose.”

“I think it will kick-start people into thinking about advice more. It could be a positive thing for advisers. But us paying the levies doesn’t bode well,” he added.

The FCA has announced the draft levy rules will be set out in the regulator’s annual fees policy consultation paper in October after its consultation period ends on 22 September. The FCA said, “The government consultation response sets out the role for us in collecting the levy to fund the provision of retirement guidance.”

“This includes the design of the levy so that it is raised from the population of firms that will potentially benefit from the retirement guidance service in terms of more engaged and more empowered customers, making better-informed decisions about how to use their pension pots in retirement.”

Ms Goodwin said within the paper, the most important thing asked in a fact find is missed out: What is your expenditure going to be in retirement?

She added, “What advisers need to do next is respond to the consultation.”