The low take up of advice is leading to a “mis-buying” crisis, the managing director of life and pensions at LV has warned.
In its response to the HM Treasury public financial guidance consultation, the provider called for the government to make it compulsory for people to take guidance at retirement, when they haven’t already taken financial advice.
Following the pension freedoms, deciding what to do with pension savings is an extremely difficult choice and LV believes mandating guidance would help ensure people are better supported to make the right decisions, and ultimately get more from their money.
Richard Rowney said this support needs to be wide in scope to provide guidance on all pensions related matters and ‘retirement income’ options, not just pensions, with funding created from an industry levy.
“The low take up of advice is leading to a mis-buying crisis, where people are making important financial decisions without adequate support,” he stated.
“It is essential that all consumers are able to access affordable, regulated advice but when people can’t, or don’t, take advice we believe guidance should be compulsory.
“Making guidance mandatory and increasing accessibility of advice would be beneficial to all, as not only would individuals be better off, but they would be less likely to rely on state support in retirement and would contribute more to the UK economy.”
Tom McPhail, head of retirement policy at Hargreaves Lansdown, said good guidance certainly helps investors to make suitable retirement decisions, but making it compulsory looks a little Orwellian.
“This is people’s own money and we should be encouraging them to make their own decisions,” he stated.
“The onus should be on pension companies to deliver good quality customer engagement and retirement services, rather than forcing all of those customers to make use of a public service which many of them neither want nor need.”
In the March Budget this year, it was announced the Money Advice Service would be scrapped in favour of a new delivery model merging the functions of The Pensions Advisory Service and Pension Wise.
Chancellor George Osborne decided to replace Mas with a much smaller body to focus on providing “frontline” services to those in financial difficulty.
Apfa recommended the new pensions guidance body work with other providers of information, guidance and advice by explaining to consumers the options available to them, adding the current Mas retirement adviser directory service should be taken over by the new pension guidance body.
