The Budget pension reforms will create a “skills gap” among advisers which will risk consumer detriment as the sector struggles to meet demand, say MPs.
In a Treasury Select Committee hearing on the Budget today, MPs grilled Apfa director general Chris Hannant on whether there are enough advisers to service the growing number of people in need of at retirement advice.
In his Budget speech last month Chancellor George Osborne shocked the industry when he revealed plans to allow savers to take their entire pension pot as cash when they reach age 55. The reform will be introduced in April next year.
The Government is also consulting on proposals to introduce a face-to-face at-retirement guidance service for all DC pension scheme members.
Conservative MP for Braintree Brooks Newmark questioned Hannant over whether there is sufficient capacity in the advice market for the Budget reforms.
Hannant said: “If everyone who is retiring next year was to seek full advice there would be a challenge on capacity.”
He said there is a challenge for the advice sector to become more efficient, and that advice could be delivered more cost effectively through the use of junior staff who are overseen by fully trained advisers.
But Newmark said: “It still seems to me there is going to be a gap in terms of the number of people and the quality of advice that is going to be needed, and which could leave the potential for errors and abuses.
“The market is going to have a problem with mitigating that risk as it evolves to deal with that skills gap.”
Hannant said: “There are advisers who have left the industry as a consequence of the RDR, and I think there is a challenge to potentially bring some of those back. The regulator could do more to lower the cost of regulation to allow advisers to invest in new talent.”
Labour MP for Edmonton Andy Love asked whether lower cost advice channels could help fill the gap between advice and guidance.
Hannant said online solutions may help to bridge that gap, adding: “There is a challenge for our sector to become more efficient and reduce the cost of advice.”