People on “lower to middle incomes” who have been priced out of advice could be given access to a “retirement savings service” that will provide information and catalyse savings and which would be designed to operate in tandem with new pension freedoms, Mark Hoban has said.
Speaking at the Tisa annual conference this afternoon (12 November), the former minister at the Department for Work and Pensions and financial secretary to the Treasury admitted the government’s radical reforms will only go so far in kick starting a saving habit.
Pension providers gathered at the conference at Plaisterers’ Hall in London were also told there is a gap in support for people who do not feel they can afford to see a regulated financial adviser.
Mr Hoban said he was pushing for digital technology to form a ‘retirement savings service’ that will give people the information they need to make decisions about how much they need to save to achieve the retirement they want.
The Conservative MP for Fareham said the digital service would not provide detailed financial advice. He added: “That is stepping in to the area of IFAs, but it [the digital service] would help people on lower to middle incomes to make decisions.”
“We have failed to equip people with the tools they need to make the best long-term financial decisions for their families.
“In the past people did not have to worry as their employer determined what they would need in retirement. Decisions that were previously the decision of their employer and the state are now their own. Consumers have not woken up to the shift in responsibility.”
He said a digital overview of people’s finances was needed as “wake-up packs are out dated. We need to empower people”.
Questions will be asked as to whether a new service is needed given the millions ploughed from the industry through enforced levies each year to fund the Money Advice Service, which is currently subject to an independent review.
Some may also argue such a state-sponsored model might step on the toes of the prospective ‘simplified advice’ models the FCA is seeking to foster through it’s project innovate initiative, which has been a key point of focus in recent weeks.
Elsewhere, Mr Hoban said the government should also revisit the subject of whether pension contribution levels should be compulsorily raised once the first phase of auto-enrolment has worked its way through.
Pointing to the saying that “what you never have, you never miss”, he called for, rather than increasing contribution levels today, asking people to pledge part of their next salary increase to boosting their pension contributions.
But he said the government should not rule out forcing people to increase their contributions and stated this will be looked at again “once the roll out of automatic enrolment is finished”.