The Government does not value financial advice for retirement planning as it focuses on cutting costs, according to the Pensions Policy Institute.
Speaking at the Money Marketing Retirement Planning Invitational in London yesterday, PPI director Chris Curry said the lack of advice risks undermining value for savers.
He said: “At the moment advice isn’t really anywhere on the Government agenda. It doesn’t seem to be valued as a particularly useful Government policy tool.
“If you read the press and look at auto-enrolment there is much more focus on getting charges and costs down.”
He says the Government believes all schemes are equal so lower charges will produce better incomes.
Curry says: “The problem is that you cannot assume everything is equal. If you have advice in the workplace that encourages fewer people to opt out and increases contribution levels, even if it costs more, then the value is greater.
“There isn’t a focus on value at the moment, it is just about making things cheap and using inertia.”
Curry also questioned how the Nest charging structure would square up to a Government annual management charge cap.
Last month the Government opened a consultation on a charge cap between between 0.75 per cent and 1 per cent.
Nest operates a dual charging structure, with members paying a 1.8 per cent contribution fee on new investments alongside a 0.3 per cent annual management charge.
Curry said a small number of people would benefit significantly from a charge cap and a ban on active member discounts.
He said: “There are certain relatively small but important groups – around 30,000 in legacy schemes and more than 40,000 on active member discounts – who can lose relatively large amounts of money for themselves because of charges.
”A lot of it is retrospective so if you look at schemes going forward then most automatically enrolled members will be with Nest, the People’s Pension, Now: Pensions or Legal & General which are big master trust schemes with low charges. This is why I don’t think a charge cap will necessarily mean much of an impact on many people.
“What it will mean is a significant change for a relatively small number of people with these high charges. The bigger issue the charge cap is addressing is trust and confidence in the industry.”