Maggie Craig, the FCA’s head of pensions policy, was quoted last week as suggesting that the industry should not talk about getting advice as if it were a barrier between consumers and their savings.
Well, I am afraid that in the case of pensions with guarantees that is precisely what it is.
People with comparatively modest pensions are facing what they see as prohibitively high fees for advice on whether they should take their pension as a lump sum.
And in many cases they neither want the advice nor are they prepared to act on it. They simply want their money and they want it now, no matter what the future implications, and in spite of any guarantees they will be sacrificing.
Speaking at Marketforce’s Retirement Solutions Forum, Ms Craig also said: “We need to be a little bit careful when talking about advice in these situations as though it was always a barrier, when there were good reasons for putting those protections in place in the first place.
“We are perhaps in danger of forgetting that the idea behind putting an advice requirement in was to protect customers, because customers may not have understood the value of the benefit they are giving up.”
It is a fair point. But perhaps consideration should be given to finding other ways of disseminating that information to consumers without creating an impasse between financial advisers and consumers.
As it is, advisers are being painted as the bad guys because they will not assist those who demand to move their pensions, or because they have the audacity to want to be paid for their work.
“Advisers are being painted as the bad guys because they will not assist those who demand to move their pensions” Tony HazellMeanwhile the FCA is adopting a “Not us, guv” approach to the whole issue of insistent clients, leaving advisers to decide whether or not they can safely act against a client’s best interests.
According to a survey by the Personal Finance Society more than eight out of 10 members would refuse such a transaction.
This raises the likelihood that a significant number of people will visit an IFA for possibly the first time in their lives and come away with a bad taste in their mouths.
But why should you help people do something you firmly believe will damage them financially?
Being forced to take advice is not only creating a barrier between consumers and their savings – it is also creating a barrier between consumers and advisers.
_________________________________________________________________________________
Who would buy annuities?
Another issue to spring up at the Retirement Solutions forum was the proposed secondary annuity market.
This could put any concerns about advice on pension guarantees into the shade. Firstly it will be interesting to see how many firms which sold annuities will be keen to buy them back.
Not many, I suspect.
This could leave the market open to those who will buy back from the desperate, at rock bottom prices.
As Maggie Craig stated, those seeking to sell their annuities could be vulnerable and have declining cognitive faculties.
They will also be trying to sell a product when they do not know its true value.
The annuities people will most want to unload will be those paying just a few pounds’ income a year – and those will be the ones least likely to find a buyer.
Of all the pension reforms announced over the past few years this is the one that I am most concerned about.
I can understand the desire to let people sell a product that they did not want in the first place, and I can understand why people would want to sell it.
I just cannot see how it will be possible to find them a fair price for it.
___________________________________________________________________________
The shrinking list
Hargreaves Lansdown has recently published its Wealth 150 list of favourite funds. This now contains just 77 selections – down from 85 at the start of the year, prompting me to wonder whether it is time they renamed it. Diminishing Wealth, perhaps?
This list has in general served self-select clients well, although you may well like funds which HL chooses not to include.
But the dwindling number does emphasise the huge number of mediocre funds out there.
Most do little more than gather fees from investors while adding nothing that they could not achieve from a tracker fund.
It also reminded me of a young journalist who a week or so after joining Money Mail asked: “If they kicked a company out of the FTSE 100, would it be renamed the FTSE 99?”
He has since left the country – but I will spare his blushes anyway.
Tony Hazell writes for the Daily Mail’s Money Mail section
t.hazell@gmail.com
