Extra revenue from the millions of new pension savers created by auto-enrolment will render the guidance guarantee levy “modest”, pensions minister Steve Webb has told MPs.
Responding to a question from the MP for Reigate and Banstead Crispin Blunt – whose constituency includes offices for L&G, Just Retirement and Partnership – Webb said the boost to pension firms provided by auto-enrolment will far outweigh the costs of funding the guidance.
He said: “We’re auto-enrolling between eight and nine million new pension savers and these huge additional sources of revenue for the pensions industry are, relative to the scale of the guidance, modest.”
The FCA is currently consulting on the design of the guidance guarantee, which includes one proposal that could see advisers paying 30 per cent of the levy. The regulator also revealed there would be “no limits” on the number of times retirees could access the free service.
However, Webb said the guidance would aim to be a “budget” service that was “cost efficient”, rather than “full-blown, regulated, tailored advice”. He added that he had seen “no evidence that the sort of levy that’s envisaged will hamper entry into the market”.
Chancellor George Osborne pledged to give all savers the option of taking free, impartial, face-to-face guidance at the point of retirement in his March Budget.
Webb was responding to questions as part of a House of Commons debate on the Pension Schemes Bill, which also includes reforms to allow greater risk sharing between members of pension schemes and their employers.