The Pensions Advisory Service has warned that the advice process could be undermined because people are forced to take advice, rather than being motivated to seek it out because they understand its value.
According to Michelle Cracknell, chief executive of TPAS, the government’s ‘free advice’ guarantee post-pensions freedoms has created a situation in which many people may not realise the value of independent advice.
She said: “A number of people are being required, either because of their provider or under regulatory guidance, to go and get financial advice.
“This undermines the real value attached to the advice process.”
Speaking at the Financial Services Expo, Ms Cracknell warned that, essentially, people were being told to get advice rather than encouraged to seek it out for the inherent benefits it could bring.
She said: “Importantly, when people are looking for this kind of advice they are also struggling to find advisers who will take on the cases.”
Ms Cracknell said there were a couple of reasons why advisers might not want to give advice; for example, a case might be too small for an adviser’s business model to justify taking on.
However, she also admitted that the government has not created a “very good matching service between customers and advisers. I think we as an industry really need to work on trying to bridge this gap.”
In July 2014, the Treasury announced that TPAS and the Citizens Advice Bureau would deliver the guidance guarantee, offering free face-to-face or telephone guidance on DC pensions, and that it would be funded by a levy on regulated financial firms.
“The government wants to ensure that guidance is trusted by consumers, and the vast majority, including most of the financial services industry who responded, said that consumers would not trust guidance given by a person or organisation with a vested interest in selling a financial product or service,” the Treasury stated at the time.
In January, the guidance guarantee was officially branded as Pension Wise.
Matthew Walne, managing director at Leicestershire-based Santorini Financial Planning, said: “I can understand this, especially when people say they need to get advice but want to cash in their pension anyway, even if an adviser advises against it. The advice still has to stick.
“The government needs to make it utterly clear the difference between guidance and advice, it is not clear-cut, and there is room for improvement and for a fine-tune of the process.”