Association of British Insurers director general Otto Thoresen says the new “free” pensions guidance regime will ultimately be paid for by consumers.
In the Budget last month, the Chancellor said all defined contribution members over 55 would be offered free, impartial, face-to face advice from next April. This was later clarified as guidance, not advice. The guidance coincides with reforms that will allow savers to take their entire pension pot as cash, also from next April.
Speaking at a Treasury select committee hearing on the Budget today, Thoresen said the PriceWaterhouseCooper estimate that the guidance scheme would cost £120m a year, which would work out at £240 per head for 500,000 retirees, was “not unreasonable”.
Thoresen said: “It will be free in that customers do not need to write a cheque upfront but it will have to be paid for and in the end it will be paid for by the customer.”
He does not believe the scheme needs to be face to face but agreed with pensions minister Steve Webb that it should be an option.
Thoreson said: “I don’t think it would be sensible for it to be face to face for everyone. For some people this service is acceptable to be delivered over the phone or using technology to ensure people know enough.
“For some people it will have to be face to face. My approach would be that we have a system you go through and if at the end you still want to talk to somebody then there is that option.”
ABI members are divided over how guidance is offered with some firms insisting the service is delivered by a third party to avoid provider bias.
Thoresen said it is possible the industry could deliver the system but it has to pass the “public opinion” test on impartiality.
He said: “The impartiality test is absolutely crucial. Whichever way we do it, it has to be demonstrably impartial, which will be a challenging test but let’s see how we can do it. I am very alive that this is something that has to pass the test of public opinion.”