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Will George Osborne’s guidance guarantee collapse under the weight of demand?

The Association of British Insurers has warned Chancellor George Osborne his Budget guidance guarantee could face “ObamaCare”-style capacity issues if demand for the service is high in April next year.

Speaking during a debate at the ABI’s headquarters in London this morning, ABI director of policy Huw Evans said the trade body favours guidance being provided by non-profit organisations such as the Money Advice Service and TPAS. However, he said the door should be left open to providers offering guidance in the future.

On the issue of capacity, Evans warned policymakers promoting the reforms could see the system struggle to cope with demand in a similar way to US President Barack Obama’s radical healthcare reforms.

He said: “The ABI’s core proposals start with getting something ready to launch by April 2015 by focusing on developing and scaling-up existing provision by existing non-profit organisations, while leaving open the possibility of providers and others engaging with the guidance guarantee once the policy direction, content and standards are set.

“The guidance guarantee should be primarily driven by provider promotion in our view. This is the practical option for April 2015 as the providers are in the best place to know the individual customer circumstances and be able to adapt their existing pre-retirement communications.

“If you run a big Government advertising campaign in the run-up to April 2015 you run the risk of an “ObamaCare” day one rush that increases your system risk and in some cases appeals to the wrong people anyway.

“If this is going to work on day one, it has to be aligned to the existing customer journey.”

Evans suggested the guidance should provide individuals with information on a range of personal finance issues that could affect their retirement decision.

“Someone who has completed the guidance guarantee interaction must understand the significance of things like debt and the tax consequences of their decision,” he said.

“This definitely goes further than information-only, but it is not regulated advice either. It sits somewhere on the spectrum between the two.”

Which? policy programme director Ashleye Gunn said the consumer body does not favour provider involvement in delivering retirement guidance.

She said: “We would like to see this guidance looking at people’s whole asset base and not just their pensions. At the moment we are not in favour of providers being involved in delivering guidance. That is based on the industry’s track record of mis-selling and sending out poor information to people about buying an annuity.”


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There are 8 comments at the moment, we would love to hear your opinion too.

  1. So we now have a potential level of ‘advice’ sitting between ‘Information Only’ and ‘Regulated Advice’, boy this is confusing me and I have been in this industry over 30 years, how the hell do we expect the general public to understand this?
    Government Over-Regulation and mistakes, have basically torn this industry apart, with some good consequences I might add, and now there is not enough qualified advisers to advise people, and those of us that are left can no longer provide ‘free’ advice due to the regulatory costs. We cannot then create different levels of advice – its either advice or not, Information Only services need to be clear with a warning that they cannot be held responsible for any action taken by an individual as a result of reading this ‘information’ and it should also state that they are not protected by the FSCS or FCA rules. Make it VERY CLEAR!

  2. A real life Whitehall farce this is. I am just waiting for the entrance, stage left, of Brian Rix.
    Younger readers may have to google this.

  3. Gavin Fielding 9th June 2014 at 2:42 pm

    Which? should put its money where its mouith is then and provide impartial consumer guidance at a reasonable cost. Some of us remember what Which? had to say about endowment policies.

  4. Julian Stevens 9th June 2014 at 7:48 pm

    Define ” existing non-profit organisations”. The CAB? Unlikely, as that organisation is experiencing a creeping starvation of funding due to the subrogation of its role by privately funded organisations such as the MAS. The MAS? What’s it there for if not to provide guidance (at my expense)? I know I shan’t be providing guidance or anything else unless the government introduces a voucher system whereby I shall be paid for my time, experience and expertise.

  5. Samuel Lewis Mayes 10th June 2014 at 8:25 am

    This is perhaps a very slow car crash in motion…

    When the client’s money runs out because they have been “guided” to strip their entire pension pot, where will the complaint fall? FOS, FSCS, Provider, Guider? Who’s going to pick up the bill eventually?


  6. Interesting point Sam @8.25am. The FCA currently only regulates advice. Advice comes as a result of a personal recommendation which is derived by KYC meetings, learning objectives/prioritising needs, assessing ATR and CFL.
    If non of the latter takes place then advice cannot take place so any guidance is unregulated. If its unregulated then no protection under FAC, FSCS or FOS. No PI issues to worry about either. Like I said in a post on a similar topic – It sounds like the place to be. A financial guider @ £65ph. Quite profitable rate without any of the normal associated costs to bare.
    It will not be long before the FCA tries to get their teeth into this and raises powers to regulate guidance too. Its a sad fact but they will have to do it. The Govt will not allow a whole pile of “cowboys” into the market so it will grant the powers to the regulator. Then the costs will spiral and the whole thing could go flat on its face. It will become a farce as well. Still never worry as long as the FAC gets more responsibility and creates jobs then it will be ok.

  7. The good news is that there’s still the opportunity for parliamentary scrutiny before this hits the statute books.

    I’m sure Andrew Tyrie is champing at the bit already!

  8. To Smithy0364, don’t expect too much if anything there at the scrutiny stage because if you followed the Pensions Bill at that stage you would know that it was a total farce and treated very offhand with personal comments which took time away from serious discussion and dismissal of evidence that supported the withdrawal of clause 20 which would have then done away with the discriminative freezing policy of which I’m sure you will be familiar. Don’t forget that we are dealing with politicians ! Need I say more ?

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