Over the last few months, there have been endless surveys recounting consumers’ ignorance - and potential avoidance - of the once much lauded and surely critical ‘guidance guarantee’ accompanying pension freedom reforms.
It’s good that we’re having the debate and acting to ensure take-up is as high as possible, but these services all miss one vital point: this is currently a non-existent service.
Most had expected yesterday’s (3 December) Autumn Statement to shed light on the Treasury’s thinking on the branding, frequency and accessibility of the service, but we were disappointed. Until we actually have a service with a name, how can consumers be expected to be ‘aware’ of it?
That confusion currently reigns as highlighted by the wide disparity in predictions. A survey commissioned by Partnership and Defaqto found that only 5 per cent of consumers would use guidance, and a pilot programme run with Legal and General had 2.5 per cent take-up; while research from the Chartered Insurance Institute showed that 92 per cent might use it.
At the end of last month, the FCA put out another consultation paper on the guarantee which did clear up some questions around provider obligations and general compliance issues.
It said the guidance guarantee session must:
• inform consumers of the scope, purpose and limitations of the session;
• inform consumers about the pension entitlement and other personal and financial information that the designated guidance provider may request from them during the session;
• request information from the consumer about their accumulated pension pots;
• request information about the consumer’s financial and personal circumstances that is relevant to their retirement options;
• alert the consumer to other sources of information and advice as appropriate and at relevant points during the session;
• provide the consumer with information about the relevant options, as well as the potential tax implications and debt obligations; and
• set out the next steps for the consumer to take and provide them with a record of their session.
The FCA also said that at the end of a guidance session a guidance provider must refer consumers to relevant sources of further information, including specialist advice, regulated advice, support tools or directories.
While all of this is of course welcomed, the man on the street will still want to know what the service is called, when it will be offered, whether employers will be offering it, how long it will last, and how frequent the sessions will be, among other things.
It was widely thought that the Autumn Statement would clear up some of these issues, but the chancellor did not even mention the service. It’s astonishing that with less five months to go, we still don’t know what the final product will look like.
So it’s no wonder that consumers are saying they are not going to use this service: how can they agree to use something that is still an unknown?