IFAs’ ability to give sound advice on auto-enrolment will be undermined if the Government does not clarify the future of the state pension, says the work and pensions select committee.
In July, the Government set out plans for a flat-rate pension but it has not yet published detailed proposals. In January, Labour suggested the Treasury may have “sunk” the plan because of costs.
In a report on auto-enrolment, published last week, the committee says the Government must make public detailed plans for the flat-rate pension “as a matter of urgency” before auto-enrolment begins in October.
It says: “Financial advisers need clarity about the future of the state pension if they are to provide sound, long-term advice to individuals.”
Last month, pensions minister Steve Webb told the committee it would be “crazy” if employers needed to take “expensive” financial advice about auto-enrolment.
He said employers could get their information from The Pensions Regulator or the Money Advice Service.
The committee says while most employees will not need one-to-one guidance, the Government and the pension industry should work together to ensure those who need independent and impartial information can get it.
The report says: “The Government and TPR should lead a discussion with employers and others about the availability of independent and impartial information. The Government should then ensure that effective support for small employers is available by July 2014.”
JM Glendinning director Andy Holder says: “It is crucial that advisers know what the state will provide when helping employees with their private pension provision.”
- The Government should remove the £4,200 contribution cap and ban on transfers in and out of Nest, if European state aid rules allow, “as a matter of urgency”
- Cap charges if any hidden charges remain in auto-enrolment pension products after the end of this year
- The pension industry should develop a “clear, accessible and universally adopted” charging structure by the end of 2012 and set up a comparison website
- The Government should “act swiftly” to provide advisers with certainty over its plans for a flat-rate state pension, so they can offer sound, long-term pension advice
- The Government should consider allowing early access to pensions so first-time buyers can fund a deposit
- The Government should hold a review into how to encourage savers to go beyond the 8 per cent minimum contribution level
- The Pensions Regulator should set out by 2013 how it intends to tackle non-compliance among small and medium-sized firms
- The Government should consider requiring providers to register with TPR or introducing stronger criteria for firms to meet before they provide auto-enrolment pensions if it becomes clear that some providers are not safeguarding the interests of pension scheme membersone-to-one guidance, the Government and the pension industry should work together to ensure those who need independent and impartial information can get it.