Pensions experts have warned Chancellor George Osborne his political legacy will be put at risk if his Budget guidance guarantee fails to protect savers from product provider misselling.
The Chancellor’s pledge that everyone will receive “free, impartial, face-to-face guidance” on their retirement options from April next year has divided the industry.
The argument centres on the role insurers should play in offering guidance, with the Treasury understood to favour handing providers a significant role.
The Pensions Income Choice Association, a group that represents a number of insurance companies and retirement brokers, says Osborne risks being “remembered as the man who did more damage to private pensions than Robert Maxwell or Gordon Brown”.
Pica chairman and Hargreaves Lansdown head of pensions research Tom McPhail says: “It would be easy to just give investors guidance and then walk away. That approach was tried with the open market option and the result was millions of pension savers buying poor value annuities from their existing pension provider; we have to do better this time.
“Unless politicians and regulators take responsibility for making sure investors aren’t missold inappropriate retirement incomes, George Osborne will find himself remembered as the man who did more damage to private pensions than Robert Maxwell or Gordon Brown.”
McPhail argues the FCA, which has responsibility for developing the guidance framework, needs to change its rules to ensure customer communications are fit for purpose.
“The Government’s guidance guarantee must not operate in a vacuum,” he says.
“The FCA needs to build a second line of defence. They must make changes to their rules to ensure product providers develop more appropriate customer communications and make the necessary interventions to ensure people who may not have been through the Government’s guidance service are appropriately protected.”
Financial Services Consumer Panel member Theresa Fritz adds: “If the guidance is to be effective, it must be delivered by experienced, knowledgeable, professionals, who are wholly impartial, working within high quality standards.
“It must be independent of providers who may have vested interests, as only by being truly independent will consumers trust and use it.”