MGM Advantage has called on the government to fund the first year of the guidance guarantee levy instead of imposing the cost on the financial services industry.
In its response to the Financial Conduct Authority’s proposals for the guidance guarantee levy, the retirement income specialist argued appropriate industry levies cannot be set until the 2016 to 2017 tax year.
So MGM Advantage argued the first year should be funded by the government and used to assess levels of take up for the service and the relative benefit to different sectors.
In July, the FCA published its consultation whereby it revealed there are three possible ways in calculating the guidance levy.
Option one means advisers will be paying 30 per cent of the levy; under option two everyone pays an equal 20 per cent, and under the third option, the allocation will be “in line with consumers’ retirement choices”.
The third option would see the allocation take into account the significance that various financial products and services play in consumers’ retirement choices.
Andrew Tully, pensions technical director at MGM Advantage, said: “We believe there are significant issues with all three options for the guidance guarantee levy currently being considered by the FCA.
“The fundamental problem is there are two major unknowns: how many people will use the service, and which of the five fee block organisations will benefit and by how much.”
Last week, the Association of Professional Advisers warned a levy to fund the guidance guarantee would be “unfair to advisers and consumers” and could swallow up to 5 per cent of advice firms’ retained profits.
Apfa has called for changes to the proposals for a levy to be based instead on firm turnover.
MGM also called for wake-up packs to be abolished and replaced by the creation of a single-page ‘pensions passport’ to give the guidance provider all the information it needs to help consumers find the best value for their pensions.
Mr Tully stated to be effective the guidance provider needs details about the individual’s circumstances: their pension savings, their family, their health, whether they have any debt.
In July, spokesman for the Pensions Income Choice Association’s Stephen Lowe told FTAdviser providers should be required by the regulator to ask “five or six health questions” of every client prior to selling a pension saving product in order to make plans for an effective ‘pension passport’ a reality.
MGM Advantage’s Mr Tully said: “We think the best way to achieve this is a single-page ‘pensions passport’ sent to consumers approaching retirement that can then be passed on to the guidance provider.
“This should contain all the relevant details, be free from provider branding and have a clear message on the importance of guidance and advice with appropriate contact details.
“If providers and schemes tell people about the availability of guidance in the midst of a large pack of information sent to a retiring customer, we are unlikely to achieve great take-up.”
