Good news – in its consultation paper published last week, the FCA said insurers will be required to inform savers approaching retirement they are entitled to free and impartial guidance and will have to provide consumers with key information about their pension pot.
The guidance sessions will be available face-to-face or as a telephone-based or web-based service and savers will be entitled to as many guidance sessions as they want in retirement.
How wonderful. The guidance guarantee will be offloaded to independent organisations rather than providers.
Yet the boos have broken out, mainly over concerns about what the guarantee can actually achieve, given people need to develop a retirement plan many years ahead to secure a decent outcome.
Of course they do. An adequate financial position in retirement is all about understanding the required savings that need to be made, use of tax-efficient plans and the selection of the right underlying investments. None of this is to be provided under the pensions guidance scheme.
True, it isn’t perfect, but it is far better than nothing. Especially for the 70 per cent of retirees who accepted the guaranteed pension income offered by their own pension company without considering other options, according to joint research by So Here’s the Plan and Just Retirement. This group were unanimous in their assertion they had been significantly less informed about their options than they had thought at the time of taking their annuity and that, in light of what they now know, they would do things very differently given their time again.
But 60 per cent of this group claimed they had been aware that they could shop around for the best deal on an annuity but had chosen not to under the mistaken belief that all providers are largely similar and the extra hassle was unlikely to make much material difference. This raises a key challenge for guidance.
Hindsight is a wonderful thing and the real trick for the guidance guarantee is overcoming the “meh” factor. This will require a spot of clever reverse-engineering that accepts the disengagement/faux confidence consumers often feel at retirement and (professionally) interrupts that inertia. Simply making something available is only half the job.
That much is true, but to the naysayers: perfect does not mean flawless. Perfect should mean fit for purpose. After all, a holiday can still be perfect even if the nuts served on the plane are not dry-roasted.
Phil Wickenden is managing director of So Here’s the Plan