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.”