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‘Guidance proposals must use what already works’

The chief executive of insurer Partnership said that, following the Budget’s announcements on pensions and providing guidance, it was important to learn lessons from other countries.

Speaking at the Westminster and City Retirement Income conference last week, Mr Groves said: “Evidence from Switzerland – where 80 per cent of people annuitise – suggests that generous annuity rates (currently at 6.8 per cent) are key to consumer engagement.

“However, guidance is important and, in Denmark, which has been voted as having the world’s best retirement regime, decisions about annuitisation are made during the saving process.”

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He added: “We have much to learn from other countries’ successes – and failures – with regards to flexibility, security and education.

“However, while we welcome the challenges to provide consumers with better outcomes, we need to hold onto the aspects of the system that already work and use our expertise to avoid simply throwing the baby out with the bath water.”

Lee Coles, head of the Money After Work programme for national consultancy Jelf Employee Benefits, said although the guidance guarantee – which was the subject of a consultation earlier this month – was important, it was unlikely to have an effect unless people trusted the industry.

Pointing to research from consumer champion Which? that found 65 per cent of people did not trust pension providers to offer the new impartial guidance, Mr Coles said: “We believe that the proposed new freedom is a good thing, but the positives are accompanied by a significant increase in the potential for poor outcomes. A guidance guarantee can only go so far, and we don’t think it’s far enough.”


Which? surveyed more than 1000 members.

Of those surveyed who are not yet retired, about three-quarters (76 per cent) felt they will need advice about what to do with their pension when they retire.

Which? has called for the guidance to be given independently, over the telephone, online or face-to-face, and for pension providers and insurers to be excluded from giving this information.

The FCA’s consultation ended on 11 June and the regulator is expected to announce the results in July.

Adviser view

Alan Higham, founder of Milton-Keynes-based Retirement Angels, said: “The FCA’s draft proposals are for the guidance guarantee to stop just short of the regulated advice standard, which results in a recommended product solution.

“The concept that this service will not be treated as ‘advice’, in the regulated sense, sits awkwardly with the FCA’s views on non-advised services in the industry more widely. The FCA has said of industry non-advice services that it is minded to consider from the consumer’s perspective whether the service was so close to being a recommendation of action so as to effectively make it advice.

“To allow the guarantee to be constructed as drafted, but excluded from advice regulations – yet to apply a more stringent standard to industry-delivered guided sales – seems difficult to justify.”