A list of conclusions and recommendations of how to implement the guidance guarantee brought about by this year’s Budget has been published by the Treasury Select Committee (TSC).
The government has committed to offering all individuals with a defined contribution plan free guidance at retirement.
Led by Andrew Tyrie, chairman of the TSC, the committee of MPs concluded that consumers will need “considerable support” at the point of retirement, not least since the market will be undergoing major changes and offering many new products.
One of the most decisive conclusions in the report was the decision that retirement guidance must be offered at least 12 months in advance of the consumer’s stated retirement date. It also recommended that any guidance should be co-ordinated with government-sponsored guidance on long-term care.
Although George Osborne committed to face-to-face advice, many witnesses to the TSC stated that it would be beneficial for consumers to use other channels, although people are free to choose face-to-face services.
The report noted that the chancellor’s use of the word ‘advice’ rather than guidance “could have been better phrased,” and made clear that any guidance dispensed must explain what protection consumers have in case of receiving poor guidance.
Savers must also be made to understand the limitations of any service offered, and that they must also be clear on the fact that the guidance cannot offer final product recommendations.
It also indicated a need for an active and innovative pension market and stated that this should include annuities. The report acknowledged the financial services industry has suffered “severe damage in recent years from large scale mis-selling” and that any new pensions products must be developed to avoid further tarnishing its reputation.
Adam Wrench, head of product and business development at London & Colonial thinks if new annuity products are developed, they must be made with the consumer in mind. “To compete, annuities need to tick more boxes and offer more.
