Personal Pension  

CML slams government’s ‘15-minute’ guidance plans

Paul Smee, director general of the Council of Mortgage Lenders, has raised fresh questions over the government’s retirement guidance plans, claiming that face-to-face sessions could be as short as 15 minutes and would fail to cover important financial issues.

The Budget revealed that the government is set to force pension providers to introduce a ‘guidance guarantee’ meaning all individuals with a defined contribution pension will be offered free guidance at the point of retirement.

In his latest blog, Mr Smee said apparently the guidance session will last 15 minutes - which he brands a sort of “Andy Warhol” approach to advice.

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He queried given the length of time how questions about the existence of debt, including mortgage debt, can be asked.

Mr Smee said: “This is not going to be the occasion for detailed counselling on how to handle it.

“I would be extremely worried if I thought that mantras about “paying down your debt” would be dispensed with little time for follow-up or detailed discussion. Many in this position will have interest-only mortgages, some of which will require a repayment vehicle.

“There should be no assumption that a pension pot can be that vehicle, even if in certain circumstances it might be appropriate.

“I want to know how debt issues will be covered in this conversation and what the hand-offs will be – as surely the main outcome of this preliminary conversation will be a series of further conversations.

“Lenders should be an early point of call where there are outstanding interest-only mortgages.”

Mr Smee said people should not get carried away with speculation about all the cash from retirees taking their funds as cash going into buy-to-let and the consequent effects on the mortgage market.

He said: “We need to consider the reading of risk; with the average size of a pension pot at well below £30,000, there is no easy one-stop investment answer. Let us not pretend that there may be.

“And to focus minds: all this is being done against an April 2015 deadline. These are big questions for the mortgage market, let alone the pensions market.

“But it is an opportunity to help customers make better decisions for their later life that should not be missed. So even if a limited solution has to be built in order to meet the 2015 deadline it should be a beginning not an end. And the clock ticks on.”