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.”