Pension providers have called on MPs to change advice rules to allow them to offer more personalised guidance.
In evidence submitted as part of the Work and Pensions Committee's inquiry into the impact of pension freedoms, Royal London, Aviva, Phoenix and Legal & General all called for a regulatory regime that can allow providers to tailor their support to people’s individual needs.
Royal London and Phoenix both highlighted the need for more clarity on the boundary between guidance and advice, with the former saying there is a lot more pension providers can do to help individuals, but are afraid to do so due to fears of stepping over the boundary between guidance and advice.
“As many individuals are unwilling to pay for full advice on cost grounds, a simplified advice offering at a cheaper cost would allow more individuals to be able to access affordable advice on saving for retirement, or using their pension savings in the most appropriate way,” the company added.
Phoenix agreed, emphasising the gap in support providers can give.
“This [clarification] can provide a vital route to a range of providers being able to provide broader guidance or targeted advice which enables much more of the population to receive the kind of contextualised, personalised, support required to address the complex decisions they are facing,” the group said.
Aviva outlined how the current regulatory framework poses a barrier to providers’ efforts in utilising digital innovation to provide affordable automated advice and personalised guidance.
“UK’s advice rules (from MiFID) prevent firms providing personalised support to customers given the liability risk," it said in its submission.
The group said a new regulatory framework is needed to allow providers to give free personalised advice, which sets out how and when consumer data can be used, clearly defines firms’ liability and protects consumers from “unscrupulous firms”.
This will require legislation to implement, it said.
Scottish Widows said a regulatory regime that supports more personalised guidance and simplified advice would also allow providers to alert customers who “appear to be making suboptimal decisions”.
The company added a simplified advice offering would allow advisers to provide advice on a narrower basis, meaning an expert could answer a single question or provide a solution to a single problem, as opposed to a holistic approach that requires a broad understanding of the clients’ entire financial circumstances.
“This would provide customers with a level of financial support that is specific and more affordable for the mass market.”
The inquiry is focussed on whether households have enough pension savings for retirement and how the government can improve outcomes for individuals.
It is looking at issues around auto-enrolment, retirement income targets and guidance and advice.
It is also looking into what support is available for the self-employed and gig economy workers and possible measures to close the gender pensions gap.
These submissions are part of the third and final stage of the inquiry.
sally.hickey@ft.com
