The new pensions guidance service has been unveiled, aiming to be the first port of call for consumers by offering free and impartial information and guidance to people with a defined contribution pension approaching retirement.
From this year, more than 300,000 individuals a year with a DC pension will be able to access them as freely as they wish from the age of 55.
The shock announcement, made in last year’s Budget, has meant the guidance guarantee has been created within a year, and new brand Pension Wise has been created for individuals to find more information.
Pension Wise will show individuals what they can do with their pension pot, the types of pensions available including how they work and what is tax-free and what is not. The launch comes at the same time costs were finally outlined.
As announced in November, advisers will have to foot 12 per cent of the bill. The figure was initially set at 30 per cent but reviewed it after a consultation.
As originally announced, HM Treasury will cover the costs of the setting up of the service, but the ongoing cost will be funded by an FCA levy on regulated financial services firms. The initial cost is estimated to be £35m – set to be confirmed in March in the FCA’s fees consultation paper – meaning the amount spread across advisers will be £4.2m.
As with any new scheme, there will be an element of uncertainty, and the Treasury has announced this is especially true when it comes to April this year given the number of people who have deferred a pension decision to the next tax year.
Deposit acceptors, life insurers, portfolio managers, managers and depositaries of investment funds and operators of collective investment or pension schemes (which includes
Sipp providers) will have to pay 22 per cent of the cost.
Instead of incorporating a contingency element to the initial levy, the Treasury will cover any costs above the levy itself and will reclaim these from the subsequent year’s levy. It says it is “consistent with the policy that the service should be funded by industry.”
But industry experts have called out about the speed in which the scheme has been set up.
Martin Tilley, director of technical services at Dentons Pension Management, says, “The guidance guarantee might have been a good idea if it had progressed more quickly. As it is I can’t see that it is going to be up and running properly by April.”
Elsewhere, Mike Webb, chief executive officer at Rathbones Unit Trust Management, says the main issue with the plan is that it “needs to be advice”, not guidance. “The DIY approach will be a massive problem. It could be a significant issue,” he adds. “People think they can deal with complex issues. I applaud it, but we have to make sure it works.”
charlotte.richards@ft.com