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Advisers hit with £4.2m bill for Govt guidance service

Advisers will be forced to pay over £4m towards the cost of funding the Government’s flagship guidance service in 2015/16, according to a Treasury update published today.

Under current proposals, advisers are set to pay 12 per cent of the running costs of the service, which is to be called Pension Wise, equating to £4.2m based on the Government’s £35m estimate.

Set up costs for the service were covered by a Treasury loan. Original plans had the advice sector paying 30 per cent of costs, the largest proportion of any industry, before the FCA backtracked.

If the bill for guidance exceeds the estimate, the Government will cover the excess and recoup the difference from the following year’s levy, it says.

The Treasury will run a pilot of the online aspects of Pension Wise in February, with people nearing retirement now able to register their interest. A previous trial run with insurer L&G revealed a take up rate of only 2.5 per cent, raising fears that thousands of people would make decisions on how to use their pension savings without understanding the risks.

As part of the trials, the Treasury is to explore how a “short, simple, standardised product” could be used to pull all an individuals’ pension information together ahead of a guidance session. Similarly, as part of a recent thematic review the FCA called for the introduction of a Dutch-style online ‘dashboard’ to help people see all their relevant financial information in one place.

However, details on the design of the guidance sessions themselves are still sketchy. The update suggests telephone conversations with The Pensions Advisory Service and face-to-face meetings, run by Citizens Advice, will be 45 minutes long but says the “exact parameters” are “still being defined”. Savers will need to book telephone and face-to-face guidance sessions in advance.

Association of British Insurers head of savings, retirement and social care Yvonne Braun says: “Today’s announcement adds little of value on what really matters – the content and scope of the guidance.

“The reforms will only be a success if the guidance service helps people ask the right questions about their new options, and if it is balanced rather than focused on early access to cash. By now HMT should have provided clarity on the detail of its scope and content, so customers and the industry can be confident that the service will be effective and understand how it will work.”

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Comments

There are 17 comments at the moment, we would love to hear your opinion too.

  1. Here we go again IFA,s having to pay for FREE guidance. What a joke most who seek guidance from unqualified staff will take it as advice because the Government is behind it. When it all goes wrong then IFA;s will probably have to pay to get them compensation

  2. And what percentage will the government / tax payer contribute I wonder?

    Do solicitors pay a levy towards legal aid, or Doctors pay towards NHS walk in clinics. This is an absurdity!

  3. Er ! hasn’t G,O. just run off with 1.something billion in FCA fine money ? and now he wants us (the industry) to find 35 million to fund pension guidance (something we do already in one form or another)

    I’m fed up with these money grabbing parasites

  4. You can nearly compare IFA’s with Dairy Farmers. They’re being squeezed to the point of extinction and if we’re not careful we’re next. How can our government talk about offering free advice when it’s the like’s of us that’s paying for it? This has got to stop we’re not a well of money that can be drained at any time for any reason. I never agreed to this.

  5. Outrageous!!
    Yet another layer of indirect taxation.
    A line of funding that might not have been considered is the millions the product providers have pocketed when they switched off the trail and renewals.
    Has anyone done the sums to work out what that windfall was? I know from personal experience the renewals have certainly not been passed back to the policy holders.

  6. One of the big failures of the RDR was to address the costs associated with giving advice and come up with solutions to reduce the cost of that advice in order to reduce the advice gap. This is another example of the costs dumped on IFAs for no particular reason other than to give politicians an excuse not to increase direct taxation – the honest way of doing it. Let us tax those who will not damage us at the election box. Well I for one am not fooled but I cannot do a thing about it.

  7. “the Treasury is to explore how a “short, simple, standardised product” could be used to pull all an individuals’ pension information together ahead of a guidance session.”

    I am sorry but this is not the preserve of MAS/ CA/ PAS to “guide” anybody. There is nothing “simple” about the new rules, it cannot be “standardised”, and “short” belittles what is really required to ensure that individuals actually get the right advice on what to do.

    Have the Treasury/ FCA not learnt anything about the problems caused by the annuity scandal (lack of OMO) which could avoid the “perfect storm” which is about to hit the pensions world on 6 April 2015.

    I despair….

  8. That’s another few quid placed on the hourly fee I guess (unless you earn under £100k for some bizarre reason and then you don’t pay…not sure how that is ‘treating anyone fairly!’). I knew cross-subsidies were frowned upon, but isn’t this guidance service levy exactly that, using the paying public to fund guidance for those that government feel should not have to pay?

    Where do they think our income comes from if it’s not by way of fees charged to the public/clients?

    Kind of a nonsense really when you think about it that way; still its really all about winning free votes from the masses at the end of the day.

  9. Perhaps some bright spark at the FCA carrying out the Fair Charging review will have a lightbulb moment.

  10. It’s at times like this that a trade body should be demanding chapter and verse on what liabilities this forced status of employer to the Guidance has. If IFA’s are paying for the running of it but without representation then employer liability should be zero. However, I have doubts that will be the case should it reach the courts.

  11. So the ‘hard working public’ who can be trusted to draw what they want, when they want, from their pensions should be given free guidance from the advice sector?

    As someone mentioned above this is a cross-subsidy from those that pay from advice to those who don’t!

  12. The ONLY advisers who should pay for it are those who receive introductions or who ask to be on the MAS adviser register. No one should pay for something they don’t want at the expense of their paying clients who will be cross subsidising otherwise contrary to what the FSA told us RDR was supposed to remove amongst other things.
    this stinks to high heaven

  13. Taking the cost of this aside for one moment ! if we consider the huge problem of savers being targeted by UN-regulated firms to invest in UN-regulated products this whole thing is fast becoming a farce not to mention a massive liability on those of us who are regulated ?

    IMHO the FCA have left this major difference (Un-regulated and Regulated) largely under the carpet, I fear its to late now to start promoting the benefits and protection of regulated advice and investments.

    This is going to get very messy very quick and people are, and are going to lose thousands !!

  14. Yet further Taxation without Representation! Surely this goes against basic freedoms.

  15. Agree with DH. Having watched the programme about the new pension freedoms last night, you get a real feeling that there will be a lot of people out there pursuing pension-holders with some scam or other.

    Dream up an idea for an investment, make it sound plausible, offer a high income in return, forget about trying to make it regulated and then use call centres and purchased databases to bombard the baby-boomers.

    I know where the policing needs to be focused, because this will be the thing that will really destroy people’s retirements, not the decision about buying a fixed income for life at historically low rates of return (much as guidance/advice in this area is also required).

  16. Which channel was the programme on?

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