Guidance promised to pension savers must be offered at least a year ahead of their proposed retirement date and must not include final product recommendations, according to a report from an influential panel of MPs that highlights the limitations of the plans compared to full advice.
The Treasury Committee report states that the service which is to be offered through product providers should be set up so as to ensure it is fully impartial, must give the opportunity for face-to-face meetings as opposed to lower-cost alternatives, and must be free at the point of use.
However, the group of MPs led by Andrew Tyrie also demands that the cost of the service in savers’ premiums be openly disclosed, and that the “limitations” of the guidance be explained to savers including that it can not offer final product recommendations.
Critically, despite the service only offering information the committee also calls for retirees to be told what “protections” are in place should they believe any detriment has arisen from the service.
This draws a stark parallel with regulated advice, which is governed by stringent rules and against which clients have a number of avenues to complain.
The committee report even criticises chancellor George Osborne for using the term “face-to-face advice” in the Budget speech, highlighting the important distinction between regulated advice and the sort of guidance being proposed.
The TSC states: “ Although what was proposed was clear in the Budget Red Book and in the consultation document, the chancellor’s Budget statement on this point could have been better phrased.”
Mr Osborne’s ‘guidance guarantee’, as it is referred to in Budget documents, will be designed to offer all individuals with a defined contribution pension free guidance at the point of retirement.
It coincides with plans to revolutionise pensions by removing all drawdown limits and allowing people the chance to take all of the savings with only marginal rate tax charges, in a move some have claimed could lead to more savers falling back on the state.
The Treasury Committee recommended the ‘guarantee’ should adhere to six key principles:
• be demonstrably impartial as to providers and type of product;
• include at least an initial opportunity for face-to-face guidance;
• be free at the point of use, with the costs of such provision made transparent;
• make clear to every consumer exactly what is being offered, the limitations of the guidance, and what protection it gives consumers in the event of detriment;
• be offered from at least 12 months in advance of the consumer’s stated retirement date; and
• be co-ordinated with government-sponsored guidance relating to long-term care.
In its response to the TSC’s Budget inquiry, published today (9 May), the FCA warned that those giving guidance cannot advise customers what their final product should be but “what it can do is tell people the implications of various decisions”.
Previously, the Association of British Insurers warned the advice will not be free but will be borne by the consumer ultimately through costs on premiums. Director general Otto Thoresen also suggested many would not need a full face-to-face service.