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Osborne’s guidance guarantee could cost up to £13m

Chancellor George Osborne’s guidance guarantee could cost the industry up to £13m a year to deliver, according to estimates from the ABI. 

The trade body says Government utilities should provide the guidance when it launches in April 2015, with a provider role possible in future.

Its “medium uptake” scenario for 2015 would see 200,000 people using the guidance service, costing £7.2m. This is based on an average cost per client of £36, delivered through an existing Government utility such as the Money Advice Service. 

If 375,000 take the Government up on its promise of at-retirement guidance, the bill is estimated at £12.8m.

The lower uptake scenario, based on just 25,000 seeking guidance, would cost just £1.5m.

The ABI assumes 10 per cent of users will want face-to-face guidance and factors in the cost of hiring staff with pensions experience on a salary of around £45,000 to provide 30 minute guidance sessions. Costs for remote-based staff are also factored in. 

The ABI estimates the remaining 90 per cent will access guidance via telephone when it launches in 2015. If more opt for guidance online, costs reduce significantly. For example, the £13m higher uptake scenario reduces to £9.5m if 30 per cent take guidance via the web. 

According to the report, compiled with KPMG, ABI members anticipate a gradual move toward online.

Cost estimates could vary significantly if the assumptions were to change. For example, estimates for the cost in 2015 balloon to £25m if delivery times were to double.

Osborne has commited to support the guidance guarantee with £20m in Government funding. 

The Government yesterday closed its consultation on the radical budget reforms announced earlier this year.

Adviser groups said providers would to be able to offer impartial guidance.

The ABI says to deliver the measures by the April 2015 deadline MAS and the TPAS should deliver the guidance to begin with. 

But it argues a provider role should be considered in future.

The ABI says: “To meet the extremely ambitious timetable, we believe the guidance guarantee must make use of the existing guidance infrastructure

“As the scope of the guidance guarantee is established, and the content and standards become clear, Government and FCA should continue to review the role of providers and utilities, and whether providers and others with a commercial interest can deliver it themselves in a genuinely impartial way.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Do the ABI actually know that we within the industry fund MAS?

  2. @ Steve D

    You can see where this is going it will be paid for by the financial services sector one way or another. To answer your question though, MAS is provided by Government isn’t it? Media, ABI, probably the Government as well, all think it is.

  3. Yep Nick, guess I had better sit on my wallet as well as my hands!

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