Pensions  

Consolidation makes sense

Consolidation makes sense

The chronic level of under-saving in the UK is now recognised as one of the defining social problems of our age. This is leaving households financially vulnerable day to day plus creating longer-term issues for those that have not adequately prepared for retirement.

Action needs to be taken now and the government’s recent public financial guidance review demands our attention if we are to improve the financial resilience of UK households and drive up savings.

Financial planning is at the heart of helping consumers to understand the need and benefits of saving.  It is a sad indictment that a combination of cost and lack of understanding of the value of financial advice has resulted in less than one in five consumers being prepared to pay for such services. We need to encourage more people to seek financial advice as well as ensuring that the mass-market are well served by financial guidance services. As financial understanding and capability grow, so will the appetite for advice and guidance.

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The Money Advice Service, The Pensions Advisory Service and PensionWise have played an important role in supporting the financial capability of consumers by encouraging higher levels of saving, both for retirement and everyday emergencies. However, these services could be made more effective by consolidating them into a Single Financial Guidance Body.

It is an opportunity to provide a step-change in the way that public guidance services enhance consumer engagement. But to be fully effective the new body will need to work closely with financial services firms to collectively provide consumers with the financial guidance they need.

The new body will need to have a heavy focus in education, helping those in debt, encouraging short, medium and long term savings to enhance financial resilience plus protecting consumers from scams and fraud. It should provide robust governance over the provision of a public guidance service and ensure efficient deployment of resources.

However, to be effective in this role, the new body needs to work closely with the private sector to ensure that consumers experience consistent guidance journeys, use similar terminology, employ generic rules of thumb and result in broadly the same guidance outcomes.  It is important too that there are links between the new guidance body and services that provide the ability for consumers to action the guidance they have received, including being directed towards financial advice.

There needs to be clarity about the scope on both the target audience and services to be provided, objectives and accountabilities and the delivery of real and measurable progress regarding the financial health of individuals and families.

The new body must operate transparently in pursuit of specified goals, so that progress can be monitored and evaluated. The target audience needs to be defined carefully, and a governance structure must be established to ensure that the body is both supported properly, and its officers held adequately to account by a single department of government, which we believe should be HMT, given the scope of financial matters the service will cover.