I know we cannot all get what we want all the time but I have always believed advice should be available to everyone. Why? Because research shows time and time again money under advice is more efficiently managed for individuals in both sickness and health, in poverty and in prosperity.
But it is important consumers know what is regulated advice and what is guidance, particularly understanding which provides recourse should things go wrong. With this in mind, I am pleased to see the Government finally admit in last week’s Budget that the Money Advice Service brand is “misleading” to consumers.
The Budget documents also announced the statutory financial guidance providers – the MAS, The Pensions Advisory Service and Pension Wise – will be restructured. This makes total sense to me as the three publicly funded bodies have independent strategies and business plans and there is no requirement for them to consult the other publicly funded bodies in developing financial guidance. I have mystery shopped all three services in the past. The guidance from each was different and in some instances technically incorrect, which is most concerning.
A new service is to be launched that will make sure consumers can get all their questions about pensions answered in one place at all stages of their lives. There will be a new, slimmed down money guidance body charged with identifying gaps in the financial guidance market and commissioning providers to fill them.
For me, the only way it can work is if those under guidance are encouraged to seek regulated financial advice. This way they will benefit from our industry’s technical skills, as well as gain Financial Services Compensation Scheme and Financial Ombudsman Service benefits.
Yes, the FCA and the RDR have made a trip to see an adviser price prohibitive for many but the Budget announcement on the increase in the tax and National Insurance Contributions relief available for employer-arranged pension advice from £150 to £500 from April 2017 is welcomed in this regard.
Five hundred pounds seems to be the magic number for advice. Indeed, the Financial Advice Market Review final report, published at the beginning of last week, announced a consultation on introducing a pensions advice allowance, which will allow people to withdraw £500 tax-free before the age of 55 from their defined contribution pension to redeem against the cost of advice.
It will be interesting to see if the DC pension investing public seek advice on whether it is sensible to cash in £500 from their pension in order to seek advice.
I am not convinced taking money from a tax-advantaged environment that may have more than 20 years left to benefit from growth is right for the average DC pension investor.
What I want – what I really, really want – is the equivalent of a 401k plan for the UK. The Lifetime Isa is a small step in the right direction.
Kim North is managing director at Technology and Technical