Pensions guidance may be too little, too late

The changes being introduced in the Pensions Bill 2014 are part of “the far-reaching review of the century”, pensions minister Steve Webb has told a parliamentary committee.

During discussions over the Pensions Bill 2014, he said the guidance guarantee, which will be funded by government and an industry levy which has yet to be determined, was “adequate”.

Mr Webb said he expected many investors to seek further specialist advice as a result of the guidance service.

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“Making people aware of guidance will be key to the service,” Mr Webb added. “Even though people know about shopping around, they have tended to stick with their provider.

“Interest in pension saving have increased since budget and the government wants to make sure providers tell people their rights.”

Mr Webb also outlined plans for the FCA to make sure that all pension providers signposted options for investors about to take their pension funds.

His comments followed a statement from Gregg McClymont, shadow pensions minister, who said an hour of guidance was unlikely to help people deal with 30 years of having to manage their pension pots.

The Labour MP for Cumbernauld, Kilsyth and Kirkintilloch East warned the Pensions Bill Committee that the guidance service being introduced next year may not be enough to prevent another mis-selling scandal.

Mr McClymont said pensions decisions were often complex even for sophisticated investors, and expressed concern over the robustness of the advice, which will be delivered by Citizens Advice and The Pensions Advisory Service.

Mr McClymont said: “The retirement income market does need reform, as the annuities system was not working for a substantial number of people.”

The promise of face-to-face guidance must be realised, he added.

He said: “Half an hour cannot equip people for 30 years of managing their pensions pot. Face-to-face guidance was promised, and now we see there are going to be very different options for people – on the phone; on the internet. Are those multi-platform approaches as credible, and are they as likely to deliver? It would seem obvious that face-to-face advice is the most substantial.”

Adviser view

Cleona Lira, an IFA with 2Plan Wealth in London, said: “Even when I have a fairly easy pension case, to deal with the client will need at least two to three hours with them. Even intelligent people need hand-holding when it comes to their pension.”