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Advisers warn at-retirement ‘advice’ plans risk provider bias

Advisers have warned plans in the Budget to provide face-to-face guidance to all retirees run the risk of biased recommendations from pension providers.

Chancellor George Osborne has said the Government will guarantee members of defined contribution schemes “will be offered free, impartial, face-to-face advice” at retirement.

He said: “I am providing £20m over the next two years to work with consumer groups and industry to develop this new right to advice.”

The initative will also be funded by an unspecified levy on providers and trust-based schemes.

But a consultation document published alongside the Budget confirms the service will provide guidance, not advice.

The paper says providers will have to offer guidance to DC customers at retirement, and asks for views on “the extent to which this guidance can be delivered by providers themselves without compromising impartiality”.

It says it recognises many consumers will want to seek further advice.

It says: “The Government will consider ways to ensure individuals are equipped with the skills and information to choose the adviser, broker or comparison site that suits their needs.”

Apfa director general Chris Hannant says: “The service needs to be impartial. At the moment people just roll over and take an annuity from their current provider – it is important that is not replicated in people being guided into a product offered by their provider.

“The customer journey may also be difficult if they need full advice following the guidance. We do not want customers to be passed from pillar to post – we would like to see more than customers simply being referred to an adviser directory.”

Informed Choice managing director Martin Bamford says: “In theory this could be valuable but I have a high suspicion the Government will screw this up. Impartiality and the transition to advice are very real concerns.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. So the Government want insurers to pay a levy to fund the advice/guidance, but also want them to provide it? They also want it to be completely impartial.

    I, for one, can see no possible problems with this…

  2. so for example “Insurer A” pays a levy, by the sounds of things has to employ someone to give this ‘impartial’ guidance or advice and one would assume might have to suggest to the at retirement client that they should move the money away form “Insurer A” to “Insurer B” and have to pay for the privilege???

    cant see that working….

  3. Setting aside the real world, aren’t providers already providing ‘guidance’ by sending out a warm up pack, mentioning OMO and also the existence of enhanced annuities and then responding to client’s calls?

    If not, then I suspect there’s a serious TFC issue… so lets assume they are.

    So how exactly would this new world differ if this ‘free impartial guidance’ is provided by the Insurers?

    The only way to ensure impartiality is to obtain ‘guidance’ (or advice) from a source which has no financial benefit as to whether the transaction proceeds or not.

    I’m sure yesterday the term ‘quality’ was used – which (IMHO) would imply the need for some kind of benchmark – perhaps some form of recognised qualification like a regulated adviser might have?

    There will also be that grey area as to where does ‘guidance’ become ‘advice’ – guidance can be provided online perhaps or in a generic form but ‘advice’ will factor in the individuals circumstances.

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