Policymakers drawing up the RDR have consistently failed to give enough attention to concerns around the effect the new rules will have on consumer access to advice. This is perhaps a natural consequence of having a regulator who is charged with protecting the consumer from possible misselling but not protecting them from the dangers of doing nothing.
In key areas such as the regular savings market and annuity advice for small pots, the changes being introduced by the regulator are likely to heighten consumer engagement problems which already exist.
With this in mind, a number of key industry figures met recently in Parliament to address the perceived advice gap for individuals with small pension pots. The talks were led by Baroness Greengross, who is also chief executive of the International Longevity Centre thinktank, and included Aifa director general Stephen Gay, Sesame chairman Ivan Martin and Partnership chief executive Steve Groves.
We were invited to Parliament to hear their concerns and ideas for change which are outlined in this month’s cover story. Gay highlighted that those who exercised the open market option increased their annuity income by an average 20 per cent. If a greater number of people with small pots are excluded from full independent advice due to cost, then the focus must be on ensuring they make sensible decisions which take account of their individual needs.
The ABI’s open market option work is moving slowly in the right direction and the work of the Pension Income Choice Association is to be welcomed but there needs to be more thought on what the Government, regulators and the industry should be doing to help people with small pots maximise their retirement income.
This should explore the role of the Money Advice Service, technology offerings, simplified advice and IFAs who think they may have a cost-effective solution to operate in this space.
On a related note, The Retirement Partnership director Billy Burrows sets out his concerns in this month’s issue about the dangers of a “low cost at all cost” attitude to annuities. Burrows believes there is an opportunity to use “nudge theory” techniques favoured by many politicians to encourage clients to make better retirement decisions.
Elsewhere in the issue, Hornbuckle Mitchell’s David White and Richard Mattison, now a director of SSAS specialist firm The Whitehall Group, go head to head on the future for Sipps.
As always comments or ideas for future issues can be sent to email@example.com.