Pensions minister Steve Webb says the at-retirement guidance announced in the Budget will lead to more consumers getting regulated financial advice, but is wary on requiring providers to pay for full advice rather than guidance.
Speaking at a work and pensions select committee hearing this morning, Webb said the guidance backing the new pension freedoms outlined in the Budget will not be independent financial advice, but added “guidance will lead people to take more formal advice”.
Liberal Democrat MP Mike Thornton suggested a provider levy was needed to fund “proper financial advice” instead of guidance.
Thornton raised concerns that as guidance will not include a fact-find, it could fall short of what is necessary to help people make the best decision.
He said to Webb: “I am not saying you have to commit but I would ask you to look at guidance as advice paid for by providers.”
Webb said he is looking at all the options but that the cost would inevitably be paid for by consumers. Webb said: “We have to be careful.”
Thornton also suggested it would be better to prevent “direct selling” and for consumers to be directed towards independent financial advice.
Webb said: “The cost of an IFA would be very big for a small pot… forced advice would be a real challenge.”