Employers still fear the UK’s “tight” definition of financial advice, meaning many people are still prevented from getting financial help or guidance, the Pensions Policy Institute’s deputy director has stated.
Speaking at FTAdviser’s Later Life Summit yesterday (May 19), Sarah Luheshi said employers were still reluctant to reach out to their workers regarding their finances for fear of getting in trouble for giving advice.
“The biggest issue is a fairly tight definition of what advice is. That actually stops a number of people from getting help to access help and guidance, through their employers or other sources.
"Because there is a great fear of breaking the rules and being held to account for it,” said Luheshi.
“I’ve heard horror stories of employers saying ‘we don’t feel we can contact our staff and say ‘have you thought about increasing your pension contributions?’ because they think they might be tarred with giving advice and be in trouble for it.
“We need to be enabling all people to feel they can access the necessary help, guidance, or advice, regardless.”
For years, employers have been accused of “burying their heads in the sand” on various financial issues regarding their workers.
But over the years, research has suggested some bosses are becoming better at offering their workers more financial support. In 2018, research from Aegon found 60 per cent of companies with a strategy for employer engagement with pensions offer their workers access to a financial adviser.
Regulatory interpretations need work
Also on the panel was SimplyBiz’s strategic development head, Richard Merrett, who said while regulation was a good thing and has improved his market in particular - the mortgage market - by making it more professional, there are limitations and these are often “around interpretation”.
Merrett agreed with Luheshi, stating: “After the last two years, more people need help than ever before. The pandemic has been a cash flow crisis for everyone - retail business, mortgage lenders, consumers…It was the access to cash that businesses were living and dying by."
“If you look at the interpretation of regulation around that, with equity release for example, there’s an interpretation of regulation that there is a restriction on what you can extract and put into cash savings.”
Merrett said the industry needed to be quicker and more agile in what is allowable through products and regulation to address consumer needs.
One major network, Merrett said without identifying it, places a £10,000 cap on how much cash an adviser can extract through an equity release plan or product.
He questioned this, adding: “With the rising cost of living, that might not be enough to address people’s needs. It’s really important that we continue to kick this forward.