The Government and the FSA have dismissed concerns about the impact the retail distribution review will have on people with small pension pots.
Earlier this month, cross-party politicians and industry leaders signed a joint letter from the International Longevity Centre calling on ministers and the regulator to address the risk a post-RDR advice gap could pose for people with small pension pots.
A joint response to the letter from the Treasury, the DWP and the FSA suggests reforms to the open market option, plans to consolidate small pension pots, the establishment of the Money Advice Service and the introduction of adviser charging will address the ILC’s key concerns.
The letter has been signed by Treasury financial secretary Mark Hoban (pictured), pensions minister Steve Webb and FSA chairman Adair Turner.
It says: “You suggest that the Government should convene a ‘retirement incomes summit’ to address a number of issues.
“We believe that a number of measures are already in hand that address many of these points.
“Firstly, in March 2011 the Government asked the open market option review group to identify and agree feasible options for a ’default Omo’. Through this group, the Government and FSA have been working with a wide range of Government, industry and consumer organisations.
“As a result of these meetings and discussions with their members, the Association of British Insurers has announced a new code of practice for its members.
“While the Government is looking at ways to help consumers consolidate their savings so that they have the biggest possible ‘pot’ to shop around with at retirement, it is clear that there will remain a significant number of people for whom it is uneconomic to seek financial advice.
“To help these people assess their needs, the Government has set up the Money Advice Service to offer free, impartial information and advice on all money matters, which may include whether it is appropriate to seek professional advice.
“Tackling the enduring myth that advice is free is a key part of the RDR, and increased transparency around commission and costs will help consumers trust the sector to help them make informed decisions about their finances.
“The introduction of adviser charging will empower consumers to decide the level of service that best meets their budget and needs.”