As it stands, we are four months in from Chancellor George Osborne’s Budget bombshell, and eight months from when the guidance guarantee to support the flagship pension reforms has to be rolled out.
As Money Marketing reported at the time, there were already cracks appearing in the guidance when the proposals were first set out, particularly the pledge to deliver “free, impartial, face-to-face advice” on an initial budget of £20m.
The literature from the Treasury and the FCA this week did its best to reassure the financial services industry that the guidance service can be delivered successfully. But while some of what has come out moves the guidance project forward, there are gaping chasms in getting the advice profession behind the initiative.
First, the positives. It was clear quite early on that a provider-led service was never going to deliver benefits to anyone other than the providers. The decision to offer guidance through independent third parties such as The Pensions Advisory Service is to be welcomed (though as Treasury select committee chair Andrew Tyrie points out, there are still question marks over the suitability of the Money Advice Service for such an important role).
The move away from being wedded to a face-to-face service to include online and telephone-based channels may not be immediately seen as positive, but should open up retirement guidance to more of those that need it.
The Treasury has sought to clamp down on the threat of “pensions recycling”, where savers abuse the new pension freedoms to reduce their tax bill, and has mandated that transfers from defined benefit to defined contribution schemes should be accompanied by regulated advice.
But of course, this is not the whole story. Providers, which were originally going to be on the hook alongside trust-based pension schemes for funding ongoing guidance costs, seem to have done a canny lobbying job behind the scenes. The Treasury, via the FCA, is now proposing other firms that “stand to benefit” should also contribute to the running costs of guidance, with advisers set to pay up to 30 per cent of the costs.
The glaring omission from both organisations at the moment is how much all this is going to cost. Now that it has been confirmed that savers will be able to access the service more than once, the ABI’s projected costs of £13m a year are set to pale into insignificance.
With Deloitte putting the true cost at more like £30m a year, is this a price advisers and the wider industry are prepared to pay? And if so, what benefits are they likely to gain as a result?
Natalie Holt is editor of MoneyMarketing. Follow her on twitter: @Natalie_Holt_MM