The pensions shake-up announced in the Budget is likely lead to an increased demand for advice, according to the Treasury select committee.
In its report on the Budget, published today, the committee says new products are likely to emerge as a result of the changes and this will make it more likely people will seek advice.
The report says: “Increased demand for products in what will be a more complex market is likely to also increase demand for professional advice.
“Creating greater freedom and choice in retirement will require individual consumers to consider a range of circumstances they may face, in particular relating to longevity. They will need to make informed decisions based on their personal needs and likely circumstances. For some consumers, these choices will require substantial guidance.”
The regulator has the power to intervene in the design of products and the committee says using these powers to ensure new products are not “defective” will be a “major test” of judgment based regulation.
During his Budget speech in March, Chancellor George Osborne also announced everyone will be entitled to “free, impartial, face-to-face advice” ahead of retirement, later clarified as “guidance”.
In his evidence session to the committee, Osborne said the difference was because he had “to communicate in English so people watching knew what he meant”. But MPs say his speech “could have been better phrased”.
The committee says the guidance must be impartial, free at the point of use with any limitations and protections in the event of consumer detriment clearly explained. It adds: “It must certainly not be biased in favour of any particular product type or providers.”
The report also says regardless of how the guidance is delivered, it must “operate in concert” with the Money Advice Service and The Pensions Advisory Service. It adds the independent review currently being carried out of MAS should be completed “quickly” because MAS has been given a role in setting the standards for the guidance.