Financial advice has a role to play in supporting people with their individual needs and “ensuring they are best equipped to make financial plans for their long-term future”, pensions minister Ros Altmann said.
In an interview with FTAdviser, Baroness Altmann, however admitted that some people simply do not want to pay for financial advice.
She said: “As with any professional service, financial advice from an independent expert has to be paid for and there is, unfortunately, a legacy of people expecting that this type of service is free.
“Following the RDR, commission bias has been banned for independent individual advice, but it will take time for individuals to recognise the benefit of using such an adviser and, for those with very small sums, I believe we need to find more cost-effective means of delivery.”
However, last month advisers received their total regulatory fees and levies bill which all saw massive increases. FTAdviser revealed that one adviser, who declined to be named, saw his fees increase by almost 400 per cent, while his turnover went up by around 25 per cent.
Baroness Altmann’s comments came as yesterday (3 August), the Financial Conduct Authority and the Treasury launched a review to examine how to close the advice gap.
The review will gather evidence this summer and will look look at the regulatory barriers firms may face in giving advice and how to overcome them.
This will include the interplay between the regulatory framework for advice and the role of the Financial Ombudsman Service and the Financial Services Compensation Scheme in redress.
Meanwhile, Baroness Altmann added that she was delighted that the government had established a guidance service for those coming up to their pension age test and that this free, independent help was a great start to help people realise why they may want to consider actually paying for individual help, rather than more general guidance.
“In the meantime, it is vital that more people are aware of Pension Wise and start to use the service, and I am delighted that we have extended this to cover the over 50s, not just the over 55s.”
Elsewhere, Baroness Altmann said she did not expect to exempt very small employers from auto-enrolment.
She said: “No matter who their employer is, all eligible workers should get the chance to earn a pension in their own right, with the help of their employer’s contribution. The state pension is only a base, people will need or want a private pension on top of this too.”
Baroness Altmann added that so far, auto-enrolment had been a success with nine out of 10 people who are automatically enrolled choosing to stay in rather than opting out.
“But, as I say, we have only just started the process of enrolling staff in small and micro businesses. It is clear smaller firms do not have the same resources as larger firms and I am working to make sure that The Pensions Regulator can provide as much support as possible.”
She added that a new national communications campaign to get the messages across is underway.
“TPR has put together a step-by-step guide specifically for smaller employers to try to make the process easier and we need to monitor the situation very closely in the coming months.
“If more needs to be done, we will look at how we can best achieve this.”
ruth.gillbe@ft.com
Additional reporting by Donia O’Loughlin
