Pension providers are at war over how to deliver Chancellor George Osborne’s at-retirement “guidance guarantee”, with at least two ABI members raising the possibility of quitting the trade body over the issue.
During his Budget speech Osborne pledged that everyone in defined contribution pension schemes would be offered “free, impartial, face-to-face advice” on their retirement options.
A consultation document published alongside the Budget confirmed the service will provide guidance, not advice.
The commitment is designed to support radical liberalisations that mean anyone aged 55 or over will be able to take their entire pension pot as cash from April next year.
However, the provider community is divided over the role insurers should play in offering guidance to savers.
Money Marketing has spoken to two major insurers who have raised the possibility of leaving the Association of British Insurers if it does not insist on the guidance being offered independently of members.
A director from one of the rebel insurers, who asked not to be named, says “over 40 per cent” of the ABI’s membership believe providers should not control at-retirement guidance.
He says: “History shows the industry has always found a way of gaming whatever is put in place to protect their shareholders’ interests.
“Even after the ABI code was put in place, 8 out of 10 people were still not getting good outcomes. So why take the risk and not separate the guidance?
“This is a chance for the industry to show we genuinely want to make this work and rebuild trust with the public.”
However, another senior insurance executive says it would be “bizarre” if providers were forced to hand over responsibility for offering guidance to a third party.
He says: “Providers who already have customers will increasingly provide guidance in the run-up to retirement, so it would be bizarre if those providers were banned from giving guidance at the point of retirement.
“So we think it is very important that providers have the right and the option to offer in-house guidance.”
Partnership director of corporate affairs Jim Boyd says: “Provider-led guidance would be inappropriate and not good for the provider community.
“It is important not only that this guidance is impartial but that it is seen to be impartial. We are looking forward to working closely with the ABI to help shape proposals to ensure the best possible consumer outcomes.”
Worldwide Financial Planning IFA Nick McBreen says: “This is a real hornets nest. You can understand why the providers want to offer this guidance because they will say they have looked after the customer for years and built up their funds.
“But ultimately there will be pressure for this to be seen to be independent of the insurance industry.”
An ABI spokesman says: “The Budget introduced important reforms for savers and it is crucial to get them right. It is right for people to be offered a range of options to generate retirement income, and it is very important to ensure that customers have the information they need to make the right choice for their circumstances. The availability of impartial guidance will be key.
“Pension providers already help customers understand and prepare for retirement, and it will be important to define their role in the guidance guarantee. The ABI are looking forward to engaging fully with the Freedom and Choice in Pensions consultation well ahead of the June deadline.”