Reactions are still coming in to the government's declaration about the future of pensions guidance for the 300,000 DC pension holders who retire in Britain ever year. On the whole, responses have been positive to the fact that the consultations, which won't always be face-to-face, will be conducted by bodies such as Citizens' Advice, the Pensions Advice Service (TPAS) and the Money Advice Service (MAS) rather than by providers; but there are disappointments for those who were hoping to see IFAs getting a big slice of the business.
"We very much welcome that the guidance guarantee will be provided by an independent body," said Darren Philp, Head of Policy at The People’s "Pensions. This is essential to ensure unbiased and balanced information. The guidance being offered not only needs to be impartial, but it needs to be seen to be impartial.”
"The long term funding of the guarantee is critical and it looks like the Government has got the balance right. []But] our key concern is that the levy does not drive up costs for low-to-moderate savers.”
Anti-avoidance provisions
"We will need to study carefully the proposed anti-avoidance rules. We understand the need for the Government to clamp down on those gaming the system, but highly complicated rules just add cost and make it harder for individuals to exercise choice. Our initial reaction is that the Government’s proposals are proportionate and workable, but we will need to see the detailed legislation and exactly what is required of pension schemes."
Nigel Barlow, Director of Product Development at the specialist insurer Partnership, said he broadly welcomed the Government's proposals – having campaigned actively to ensure that people receive the best retirement outcomes for over a decade.
“Today’s announcement provides a significant amount of food for thought and the impact of these proposals will be discussed and debated for months to come. Overall, we are pleased that with many consumers significantly underestimating the time they will spend in retirement, they will now have access to a guaranteed level of guidance provided by an impartial body.
“We are also gratified to see that Government has listened to stakeholders and chosen to put independent organisations such as The Pensions Advice Service (TPAS) and Money Advice Service (MAS) at the heart of the proposition. The only way to truly make this work is for the guidance guarantee to not only be impartial but to be seen to be truly impartial.
“As a keen advocate of the pensions passport (and a member of PICA), we are also happy to see that the consultation appears to include reference to a similar document which will help to make the guidance process as valuable as possible." However, he agrees with Panacea Advisor's Derek Bradley that the suggestion that financial advisers may need to fund up to 30% of the guidance costs is "somewhat of a shock to the industry as a whole," and that "further clarification is needed around this so firms – especially the smaller ones – can make the necessary provisions."
“With regard to Defined Benefit (DB) schemes, we are pleased to see that the Government is proposing to make professional financial advice a requirement for those transferring from one of these products. This is vital, as it will ensure that people realise that a short-term financial gain could mean a long-term income loss. Ultimately, the devil is in the detail!"
Reactions from retirement income products was also coming in from the providers themselves.
“The Government’s intention to change the tax rules to allow providers to create new retirement income products is welcome news for savers," said Simon Smallcombe, UK Managing Director of AXA Life Invest. "From the very beginning of this consultation process, we have pushed for a level playing field for all retirement products, so that they can compete on the same basis when it comes to tax."
“We also welcome the FCA’s proposal to amend the requirements around the open market option to broaden it out to all retirement options, not just annuities. Consumers deserve to know that they can shop around for all sorts of different retirement solutions. This change will mean a much greater range of options for UK savers, who will gain the right to access all retirement solutions which might be right for them."
“Full implementation of the guidance guarantee is thankfully going ahead. The Government has chosen to focus guidance on the at retirement stage, four to six months before people’s intended retirement date, but that is too late to make any real difference to the actual retirement income pensioners will receive. UK savers must not rely on this alone. In the new world of flexibility and choice, professional financial advice will be more important than ever in ensuring people are well-prepared for retirement.”
