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.”