The long awaited Financial Advice Market Review (FAMR) final report, published this week included much to be pleased about.
FAMR presented a golden opportunity for the government to solve the advice gap and we’re pleased it will take action to address this, alongside the regulator.
We were particularly pleased to see the report recommending changes to the retirement advice tax allowance for employers to make advice more affordable.
In our submission to the FAMR consultation, we called for government to extend this allowance and remove the rule that the whole amount is taxable if advice exceeds the allowance.
Increasing the allowance would also incentivise employers to pay for pension advice for employees and it could feasibly cover the full amount of advice when lower cost online solutions are used. Employers play an important role in helping people save into a pension and it is only right that they help people when they come to draw it.
It was also encouraging to see the review has recognised the current different levels of advice aren’t working for consumers, particularly singling out Basic and Simplified Advice variants.
Our research shows consumers are clearly confused around the different terms and could be misled into believing they are receiving full advice when it is simplified. A single definition of regulated advice would help to clear up confusion and show people the value of regulated advice.
We were disappointed that the report did not take forward our call for a voucher for the most vulnerableThe final report also suggested a new category of “streamlined advice” for customers with simple needs. Simplified advice can lead to better outcomes for consumers but it is often not suitable at the point of retirement when the choices are complex.
We will be seeking clarification from the government and the regulator to ensure that this new category does not apply to retirement advice.
We know that the cost of advice can put people off taking it, and we welcome the suggestion that people could be allowed to pay for advice from their pension pot. However, those with the smallest pension pots may still struggle to justify the cost, so we were disappointed that the report did not take forward our call for a voucher for the most vulnerable.
A voucher would be particularly beneficial for those whose pension pots will need to work extra hard in retirement, and we will continue to discuss this idea with government to see how it could be delivered at low cost.
The Review is absolutely right to recommend the development of a Pensions Dashboard as the benefits for consumers are clear. However we do not think people should have to wait until 2019 and we believe this could be delivered sooner.
Finally, the other big positive to come out of the report was that it clearly recognised the value of automated advice. LV= is pleased to be at the forefront of innovation for retirement solution products.
We are keen to work with advisers to use bespoke versions or elements of our new technology to improve efficiencies and ensure everyone can benefit from affordable and convenient advice. LV=’s Retirement Wizard is designed so that it can be white labelled for other organisations, including intermediaries, corporate partners and employers.
Overall, there’s a lot to be supportive of in this report and we were pleased to see genuine recognition from government that a range of measures are required to make advice genuinely accessible for all.
As ever, the devil will be in the detail and it’s important the industry engages on the implementation of these reforms. Equally important, however, is speedy delivery so advisers have regulatory clarity and consumers can begin to get the better outcomes they deserve as soon as possible.
Richard Rowney, managing director of Life and Pensions at LV=, and FAMR expert panel member
