Pensions minister Baroness Ros Altmann has said she would like to see advisers create a “fixed price package” of advice to provide a basic service affordable under the government’s £500 ‘advice allowance’.
Chancellor George Osborne announced the Pensions Advice Allowance in the March Budget, which will permit people to withdraw £500 tax free from their defined contribution pension pot before the age of 55 to spend on financial advice.
But some advisers have said £500 is not enough to pay for anything near a comprehensive appraisal of someone’s pension affairs.
Responding to a question from FTAdviser about what she expected advisers to provide under the advice allowance, Baroness Altmann said £500 is a “realistic sum” for advice, and she would welcome set prices from advisers for certain services.
“I’d like to see the industry design some kind of fixed price package,” she said.
“Advice firms with lots of clients might think that would be really interesting - a basic advice service for £500, individualised, pre-approved.”
But she added this is not for MPs to decide, saying, “that’s not up to us - it’s certainly not up to me”.
She said the £500 figure - the reasoning for which has yet to be explained by either the Treasury or the Financial Conduct Authority - is the government saying “this a meaningful sum of money to help you fund advice”.
“It also is a clear signal you shouldn’t expect everything to be free and that hundreds of pounds is a realistic sum [for advice].”
The pensions minister said the move was a clear signal from the government people should expect to pay such a sum for individual advice.
“This is the government saying to people we recognise there’s a real value in advice and so we are incentivising and helping both employers and individuals to pay for that,” she said.
“I hope advisers will be encouraged to see the government is actually taking seriously the value of advice and signposting consumers to that - it hasn’t happened really before.”
Paul Turner, principal partner at Leeds-based the Financial Planning Practice, said the idea of a packaged advice system was a good one in principle, but was concerned about the lack of ongoing review and monitoring such a system may present.
“The limit used to be £150 - that was a non-starter. This is a step in the right direction but what I’d have reservations about is that you can do it as a one-off.
“There’s an element of risk from my point of view because you wouldn’t be able to verify the kind of advice being given.
“I’m not sure if you can give this kind of advice on a one-off basis but it depends on what you are trying to achieve.”
The Treasury is currently consulting on how the advice allowance would work and will report its findings in the summer.
ruth.gillbe@ft.com
