Speaking at a Hartford retirement panel debate at London’s Tower 42 last night, Altmann suggested the Government implement a “National Wealth Service” which would offer Britons free financial “check ups”.
She said: “I would be in favour of having something like a National Wealth Service to run alongside our National Health Service where every year or two you have a financial check up.”
But Altmann said the need was more acute for people approaching retirement as annuitants were charged commission at 1-1.5 per cent of the pension pot whether or not they had received advice.
She said: “When it comes to buying a standard annuity of course there is money in the product that would provide for advice. You know 1-1.5 per cent of your pension pot is deducted whether or not you have an advisor and I think the Government should make sure people get some advice for that.”
As highlighted by Money Marketing last month, Legal & General, Aegon, Friends provident and Norwich Union keep the cut of the pension pot if no advice was given. Meanwhile Clerical Medical, Scottish Life, Axa and Standard Life pay the adviser who sold the pension in the first place whether or not they gave advice on the annuity sale, although the later two are swapping models.
Fellow panel member William Burrows Annuities’ Billy Burrows said that the cost of advice was standing in the way of people getting the best annuity rate.
He said: “A lot of the problems with the open market option is not the open market option itself it is actually the cost of advice.”
The panel also waded into the public sector vs private sector pensions debate, which has been taking up endless column inches lately.
Financial Technology Research Centre director Ian McKenna said the gulf between public and private sector pension provision was blurring politicians’ views of reality.
He said: “I wonder if a large part of the problem, at the risk of being controversial, is the fact that those who make the laws and those who write the laws are cushioned from this pensions crisis. They do not have to worry about any of it because they have publicly funded pension arrangements. They are totally insulated from reality.”
Altmann accused the Treasury of deliberately hiding how much public sector pensions will truly cost taxpayers.
She said: “What I think is absolutely wrong is that there is no transparency whatsoever and that these public sector schemes are mostly completely unfunded which means today’s workers are borrowing from future taxpayers but no one is telling the future taxpayers the truth about what those future pensions will cost. The Treasury is hiding the true costs away and it must be deliberately. That has to be wrong.”
Altmann also raised concerns about pension funds’ over reliance on equity investments.
She said: “There is an almost religious belief that if you invest in the stock market you will always do fine. I think certainly going forward that is a very dangerous way of thinking. If you want to invest in the stockmarket and clearly there is a risk premium available that you should be able to benefit from over and above risk free gilts I am not convinced that it is safe to do that without some kind of downside protection because what if it goes wrong?
“There is this whole notion that there is only the one sort of risk premium that you can hope to benefit from, the equity premium, there are other sources of risk premium out there I believe, illiquidity, currency benefiting from different types of investment in a diversified portfolio but most ordinary investors simply do not have access to products that will help them benefit from that.”