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Advisers to pay towards Budget guidance costs

Advisers will have to pay towards the costs of delivering the Government’s Budget guidance to support its flagship pension freedoms policy through an industry-wide levy.

Independent pensions consultant Ros Altmann says the guarantee will be delivered by a new organisation, with the intention of creating a national brand of ‘Retirement Pension Guides’.

“This could mark the beginning of a new industry,” she says. “These officially approved guides will need to operate to consistent, robust, well-enforced standards.”

She says the guides will not be regulated by the Financial Conduct Authority but they will oversee the standards and that for the initial period the Treasury will control which organisations can carry out the work.

In a short statement ahead of a formal announcement later today, the Treasury reveals insurers have been blocked from providing the guidance.

In March’s Budget the Chancellor said the service would be delivered through a new duty on providers and trust based pension schemes.

The Government has decided not to go ahead with a proposed ban from defined benefit schemes to defined contribution schemes. But it has caveated this with a requirement individuals looking to transfer from DB to DC schemes have to take financial advice. There will also be new guidance for trustees on the use of their existing powers to delay transfer payments and take account of scheme funding levels when deciding on transfer values. 

There had been widespread concern that if providers were involved in delivering the guidance guarantee it would not be seen as impartial by savers.

Back in March, Chancellor George Osborne originally promised the guidance would deliver “free, impartial, face-to-face advice”. The Treasury now says the service will be provided through a “broad range of channels”, including the internet, telephone and face-to-face guidance to individuals or groups.

The FCA has confirmed that consumers will be allowed to use the service as many times as they wish, including face-to-face sessions. 

The measures are all part of the pensions changes announced in March’s Budget which will mean from April next year savers can take their entire pension pot as cash from aged 55. 

Speaking on the Today programme on BBC Radio 4 this morning, Osborne denied the guarantee would offer only “superficial” help to those approaching retirement.

He said: “I don’t accept that. This is going to be free and impartial guidance for millions of people who for the first time are going to have access to the money they have saved through their life. We are going to work with people like the Citizens Advice Bureau and Age UK and others to make sure people get the best possible guidance and it is genuinely impartial and they are not being sold a product.”

Confederation of British Industry John Cridland welcomed the new requirement for financial advice before moving from a DB to a DC scheme. He says: “Pension holders should be able to convert their defined benefits into cash, if that’s based on sound financial advice and is in the interests of the wider scheme.

“We don’t believe that there will be a significant flight from DB schemes, as some fear, because many people like the security of a reliable income so we don’t expect a major impact on the bond markets.”


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There are 24 comments at the moment, we would love to hear your opinion too.

  1. Dear Mr Garage Owner I want you to pay an industry wide levy to pay for free MOT’s.

    Can you imagine the outcry.

  2. Quietly resigned 21st July 2014 at 9:13 am

    Well I will certainly be joining the queue to carry out lots of DB to DC transfers. No risk there and the PI insurers will love it. Good to see the media interchanging the guidance/advice word so freely. At least everybody knows exactly where they are. Clear, fair and not misleading. Splendid.

  3. I seem to remember that the boston Tea Party was about taxation without representation.

    Firstly, Osborne purloins the fines revenue to fund things which should come out of the defence budget; now this.

    Taxation without responsibility.

  4. I only hope someone, somewhere, knows what they are doing! What possible thought process can have occurred to arrive at this decision? The general investor will have a great deal of trouble understanding the outcomes of advice and guidance. I predict some court cases eventually which revolves around the minutae of these two terms. Even the Chancellor is not consistent in their use.

  5. I’ve decided I want to opt out. Which box do I tick?

  6. 6 years of progressive sharemarkets and now people are going to have their ‘retirement fund’ to invest/control…What could possibly go wrong (remember what happened to the markets just after drawdown was introduced)?

    Think I would pay for regulated advice and have the comeback (gets gun and shoots himself squarely in the foot)!

  7. WTF? Why am I paying towards this? And why is such an important, life damaging decision, being trivialised by Osborne insomuch as ‘simple guidance’ is enough? Do we get to sue the Government when this goes wrong?

  8. Will MAS and PAS be regulated. Will they have PII as guidance as we all know will lead to people taking it as advice and looking at MAS track record it will lead to wrong decisions being taken. Will the staff at MAS and PAS have to be qualified to the same levell as us so that they actually know the difference between different pension products some how I doubt it. Just look at the FCA FOB and FOS

  9. Further down the line MAS gets fined by the FCA for mistakes in its advice process etc. That then gets paid by regulated firms through and increase to the levy to MAS to cover the fines.

    There will need to be a huge increase in MAS’s final salaried staffing levels to cover this as well, nationalisation on the quiet in the name of “free” and barging aside representation by those who are forced to pay.

  10. What a complete plonker. I saw the interview this morning on the BBC. As ever the interviewer was not on top of her game. She listened politely while this clown was expounding on trusting people and giving them the choice to manage their own affairs, but omitting to mention that on the other hand he doesn’t really trust them to save to he is compelling them with AE.

    There was no mention of the fact that the average pension pot is less than £50k – so it rather makes a mockery of the PR hype that these measures will help fund for care homes. It won’t buy a week’s breakfast at a care home.

    No mention of what happens when the well runs dry (for the larger pots) and what effect this will have on the welfare budget. Why not have a swinging time for a couple of years in the knowledge that when the money runs out the State will provide.

    Why do we put up with these buffoons? We now have to pay for the ‘guidance’ which presumably will be unaccountable and unregulated. Perhaps they will refer to an IFA – and will the blighter be prepared to pay our fee – which will include an extra amount to pay for the levy? And even if they do how many will then be advised to take an annuity anyway?

    If this isn’t PR spin and political chicanery I really don’t know what is.

  11. Derek Bradley ceo Panacea Adviser 21st July 2014 at 10:09 am

    Now this would be a good use of regulatory fines. After all, the bumper fines given to banks and their like no longer go to reduce the regulatory cost burden. Instead they go to help rehabilitate wounded troops and send a reducing number of WW2 veterans to D Day commemorations.

    All quite laudable causes but the financial services industry did not have any say in the sending of our troops into danger either now or in years past.

  12. When the budget changes were announced i thought that advisers had done ok, more options meant more people knocking at the door of IFA’s looking for advice.

    Now i find out that not only is this looking unlikely because the government is going to start promoting the use of MAS and the PRA but we’re actually going to be paying for it.

    I’ve double checked my exam certificate and it states DipFA not MUG so where does the government get off treating me like one?

  13. Christopher Wicks 21st July 2014 at 10:19 am

    Quite apart from the sheer annoyance of having the cost of another ineffective ‘government backed’ service laid on us, it will completely fail to address people’s needs, just as MAS does. People don’t need an exposition on the options available at retirement or tables on a website etc. They need someone to assess their individual circumstances and tell them exactly what to do and then to sort it out for them. Just giving them a load of general flather on their options will be worse than useless to most of them and this will cost multi-millions of £’s just as MAS does. Well p…d off! Monday morning, hey!

  14. “Advisers to pay towards Budget guidance costs”

    No – lets get this factually correct. The correct headline should read – “clients who currently pay for financial advice, to subsidise those who want it for free”.

    This is a bit like Margaret Thatchers very astute (but often mis-interpreted quotation) when she said “there is no such thing as society” – by which she meant it’s no good thinking there is some mythical pot of gold that will subsidise everything so no-one has to pay – ultimately it’s the end user (in her instance the taxpayer – in ours the existing clients) who are left holding the bill – and they are a finite resource.

  15. I for one welcome the above.

    There has been some sense re DB & DC schemes as there are times (very rarely) that it does make sense to move them, such as ill health or divorce.

    I have no objection in paying towards the new guidance arrangement, providing it makes it VERY clear the individual should seek advice. That if they do not, they are not covered by the FSCS and have no rights to claim.

    My fear is we will land up paying out via the FSCS for poor GUIDANCE, which would not be acceptable.

    We also need certainty that Labour will not back track this legislation. There are great financial planning opportunities, which if we are to advise and implement we need certainty that they will allow the payments in the future.

  16. Oh no… I can just see it, another expensive ineffective quango (like MAS) being set up to oversee this, with an overpaid chief executive, big bonuses, generous pension scheme etc. and who builds expensive little empire at the expense of advisers who then get hundreds of claims against them 10 years later because it hadn’t been thought through properly. Unbelievably stupid. (Please note this is my personal opinion I am not speaking on behalf of my company).

  17. To those that suggest this is a poor outcome and will lead to the state having to pick up the bill once they have spent their money. This is very simple, the welfare system pays anyway. These pots are so small in most cases the consumer still will be entitled to benefits.

    Do you really think a pension pot of £30,000 (total pension savings) means these individuals will not try to gain additional income in retirement via the welfare,. Even without a lump sum 100% income would be £1,500 pa, £125 pm.

    This is very simple, set the state welfare payment and pay no more than this.

    Why should those that HAVE saved be told they cannot spent THEIR money, but the person next store who has saved NOTHING gets it all paid for. Yes they had tax relief on the savings, but the income is tax so the Government gets it back in many cases with interest..

    The reason this has got so far out of hand is a system that for far to long has benefited those that have chosen not to save but spend. Those on lower incomes that have saved small pension pots should be able to benefit from their sacrifice, not be told they actually will be worse off then the people next store who went on holiday, the pub, smoked and saved nothing.

  18. I now await the response to these proposals from our professional bodies and trade associations who claim to represent us – come on show us our money is well spent.

    As for Osborne, this is another section of society you have alienated by this state imposed tax – and you said this morning you are try to get away from the nanny state, well in this instance it seems as though you have been taking lessons from Kim Jong-Un

  19. Roz Altman says “This could mark the beginning of a new industry,”

    Yes, huge growth in the quango’s paid for from the regulated financial advice industry thereby shrinking it

  20. You can’ t help thinking that these plans haven’t been properly thought through – all ‘back of an envelope’ stuff.

    The rumours that the plans were put together by Osborne, Oliver Letwin and Lord Lawson the day before the budget with no Treasury civil servants present start to look more and more accurate.

  21. Julian Stevens 21st July 2014 at 1:11 pm

    Hey George, you’ve f**ked right up with this plucked-from-thin-air figure of £20m for pre-retirement guidance. Everyone’s saying it’ll be nothing like enough.

    Hmm, yeah, more, much more, will definitely be needed. From where can we raise the extra however many tens of millions of pounds it’ll probably take?

    Easy ~ just give the job to that bunch of not-fit-for-purpose bozos at the MAS and let it increase its levies accordingly.

    Won’t they object?

    Who? Advisers? Sure they will, most of them already think the MAS is a crock (as does everyone else) but there’ll be nothing they can actually do about it, not least because they don’t have any representative body worth a light. All the MAS has to do is send out new invoices on the basis of pay up or pack up and there’s the additional funding. Easy.

    Sounds good. We’ll go for it. BTW, is anyone at the MAS actually suitably experienced or qualified to give quality guidance?

    Aw, shit, don’t worry about things like that George. They’re not required to have either experience or qualifications. Just give them a script to learn, tell ’em not to stray into telling anyone anything actually useful or relevant to their particular circumstances or objectives and that’ll be the job done. One way or another they’ll end up going to an authorised adviser, we’ll get the credit for having helped them down that path and best of all it won’t have cost the government anything.

    Yeah, right, when you put it like that it all makes sense.

  22. brian weatherley 21st July 2014 at 1:21 pm

    How can anyone who has no input to, no involvement nor influence in the development or execution of Budget simplified advice, be made financially responsible it is implementation ? .

    So, “we are going to work with Age Concern, Citizens Advice Bureau and other to obtain the best guidance possible” What tosh. Are the advisers within such organisations to be qualified to Diploma standards? Obviously, Not. Surely, as such, the advice cannot be of universal quality and will be the “best possible” NOT “the best”
    The one armed paper-hanger comes to mind

  23. I bet every insurer in the land has let out a huge sigh of relief !!!
    And every adviser (if you are like me) just put their head in their hands and sobbed !!!

  24. Governments only listen when they think they are going to lose votes

    Maybe Harry should set up a “pledge website” where by every IFA and other members of the financial services industry who feels royally ripped off can sign to say that they will never ever vote Conservative or indeed never to vote for either of the three main parties until they are listened to.

    Just imagine what Call Me Dave, Ozzy Osbourne etc will think if faced with the lose of over 10,000 votes.

    Their advisers will have a fit of the vapours

    Its the only way, moaning won’t change things only united action!

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