The FCA will need to establish a regulatory definition of guidance services in the wake of the Budget, according to EY.
Chancellor George Osborne stunned the pensions industry in the Budget last month when he announced people would be able to take their entire pension pot as cash from age 55 from next April.
Alongside the reforms, Osborne said members of defined contribution schemes “will be offered free, impartial, face-to-face advice” at retirement from April 2015.
A consultation document published alongside the Budget confirms the service will provide guidance, not advice.
Speaking at a Tisa distribution event in London last week, EY insurance director Jason Whyte said: “If they want this to work they will have to have a firm definition of guidance. That is an interesting thing to be watching because one way or another we have to find out what the boundaries are.”
Intrinsic chief executive Richard Freeman said: “General adviser reaction to the Budget is positive. But I am very concerned about how the definition of guidance and advice end up.”
Freeman also raised concerns that the pension reforms outlined in the Budget risk future misselling scandals.
He said: “If we are not careful, there is a risk we get a misselling scandal in five or six years time, where pensioners come back and complain because they did not take an annuity.”
Towry chief executive Andrew Fisher agreed. He said: “While annuities are pretty bad products, they are better than third-hand Ferraris. I think the reforms are a bit reckless.”