Urgent reform to the financial advice market is needed in order to avoid a “perfect storm” of risks to consumers ahead of next April’s at-retirement reforms, according to Royal London.
The provider has today (15 December) warned that there is a risk of massive consumer detriment in the absence of action to secure much greater access to financial advice.
As the Pension Schemes Bill enters the House of Lords, Royal London is asking peers to strengthen the legislation, stating that without appropriate impartial advice, consumers are far more likely to use their new found freedom to buy unsuitable products like drawdown on a non-advised basis or “sleepwalk” into poor value products offered by their pension provider.
A report by Cazalet Consulting, commissioned by Royal London, argued that the Retail Distribution Review, the subsequent ban on consultancy charging and the lack of relationship between scheme adviser and members, have all conspired to limit ‘middle market’ retirees’ access to affordable financial advice.
The group argued that the need for impartial advice goes much further than the government’s proposed ‘guidance guarantee’ and those in the House of Lords must put pressure on MPs to bring forward amendments setting out detailed proposals on how the advice market can be improved to meet the needs of consumers most effectively.
Phil Loney, group chief executive at Royal London, stated that with less than four months to go he sees a “perfect storm” brewing.
“Unless action is taken now to prevent the combination of a dramatic fall in the availability of impartial advice with the introduction of new found pensions freedoms the result could be massively detrimental to the consumer.
“This advice must be impartial and not simply a vehicle for the incumbent pension provider to sell their own products.
He added: “Pensions minister Steve Webb and the Financial Conduct Authority have previously indicated their support for introducing a more affordable advice model – but over the past eight months nothing of consequence has happened.
“As the Pension Schemes Bill enters the House of Lords, this is the last chance to ensure these reforms deliver on the Budget rhetoric.”
peter.walker@ft.com
