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ABI: No blank cheque for ‘advice lite’ Budget guidance

The Association of British Insurers says providers will not sign a “blank cheque for an advice lite process” when it comes to funding at-retirement guidance to support the new pension freedoms outlined in the Budget.

The Government has said it will inject £20m to the initiative to fund start up costs, and will impose an unspecified levy on pension providers and trust-based schemes. 

Speaking at the Money Marketing Retirement Planning Summit in Bedfordshire today, ABI director of policy Huw Evans says delivering the Budget guidance will be the “art of the possible” and must make use of existing services to keep costs down.

Evans said the guidance service has to be “shallow”, because there are already established third sector providers of debt and money guidance, such as Citizens Advice Bureau, and it would be “odd” for the service to seek to duplicate this or regulated financial advice.

He said: “The pension industry is on the hook for paying for the guidance guarantee – the same industry that has just seen charge caps imposed on the workplace pensions it offers.

“So this has to be a value for money, tightly run process, making use of the existing systems – the industry cannot and will not sign a blank cheque for an ‘advice lite’ process.”

Evans added the time pressure of setting up the service by April 2015 means it will “inevitably be more akin to an encouragement to consumers to ‘stop and think’ before acting, rather than an in-depth exploration of all the issues”.

He said: “Given we only have 10 months until this service has to be up and running, we need to recognise the guidance guarantee will be the art of the possible, rather than a perfect solution.

“For us, a good outcome of the guidance guarantee would be that people know there are risks in different options, that they are able to make a more informed choice about taking the pot as cash, buying a retirement income product, or leaving the money invested, and they know where to go with their other questions.”

Evans also said the ABI believes access to the service must be triggered by individuals’ retirement dates, even though this means those with multiple pots could be offered the service more than once.

He said: “But short of creating a central database with all providers’ pots, so that the guidance guarantee is offered to individuals once, and which is certainly not deliverable by next April, this is inevitable at least initially.

“Over time, pot follows member should help avoid multiple pots.”

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