The Pensions Advice Service (Tpas) has claimed proposals to expand Pension Wise’s remit to include secondary annuties will not see the guidance service cross the line and offer advice.
On 6 September the Financial Conduct Authority laid out plans to reform Pension Wise - the industry-funded free financial guidance service - in preparation for the launch of the secondary annuity market.
The proposal included requirements that guidance providers have in-depth knowledge of the secondary annutiy market, including the functioning of the market itself and the tax implications of cashing in an annuity.
Michelle Cracknell, chief executive of Tpas, which offers Pension Wise guidance, was confident her team would not stray into advice territory.
She said: “The line that we draw is that we never give a definitive route of action. But we will challenge people.
She said “being patient and keeping customers on the telephone” was key, “because they tend to reveal things as they go along.”
This, she said, allowed guidance providers to help consumers understand their full circumstances better so that they could make better-informed decisions for themselves.
She added: “Our work for Pension Wise is monitored by the FCA and they are comfortable we are not giving advice.”
Gillian Guy, chief executive of Citizens Advice, which gives face-to-face Pension Wise guidance, said: “Good guidance is vital to ensuring consumers get the most out of the pension freedoms.”
Despite past concerns that Pension Wise guidance had not been a sensible use of money, spokespeople for the financial advice industry were broadly in favour of the FCA’s proposed guidelines.
Keith Richards, chief executive of the Personal Finance Society, said: “Moves to raise the standards that apply to individuals who are offering preliminary guidance on a complex area of financial planning should be welcomed.”
He dismissed suggestions that the guidelines could see The Pensions Advice Service (Tpas) and Citizens Advice - which provide Pension Wise guidance - cross the line from guidance to advice, adding the two organisations provided “an invaluable initial contact point for consumers”.
However, he added: “That’s not to say that consumers who use the service don’t believe that they have received advice.”
While Mr Richards broadly supported the introduction of a secondary annuity market, he said “unintended consequences must be mitigated to protect the public best interest and the reputation of financial services, which will otherwise bear the brunt of criticism in the future.”
Apfa’s Mr Hannant agreed with Mr Richards that Pension Wise should cover secondary annuities.
He said: “If the pension guidance service is supposed to provide a comprehensive view on pensions, then it needs to be comprehensive.”
He said Pension Wise was “obviously second best” to regulated financial advice, but added he recognised some people had “very small pots” and could not afford full advice.
Like Mr Richards, he said he hoped Pension Wise would encourage those looking to sell their annuity to take professional advice.
On the funding of Pension Wise now offering secondary annuity guidance, Mr Hannant said it needed to be “fair and proportionate”, suggesting occupational pension schemes should co-fund it along with the FCA-regulated institutions.
But unlike Mr Richards, Mr Hannant took a hard line on the secondary annuity market, saying it was an “almost unresevedly bad idea”, and called for it to be shelved.
David Trenner, technical director of Intellgent Pensions, agreed describing secondary annuities as “a dangerous market”, that would essentially be closed to people who could actually benefit from it, such as those in poor health.
Mr Trenner said it was “absolutely right that the FCA look at what the guidance-givers are able to say”, but he added it was difficult to ensure people don’t take guidance as advice.
“People will believe they have had advice and there’s nothing you can do about it,” he said.
james.fernyhough@ft.com
