Legal & General is the latest pension provider to back the introduction of ‘targeted support’ as part of a regulatory shake-up of advice and guidance.
In its response to the discussion paper on this topic — issued jointly by HM Treasury and the FCA — Legal & General head of product policy strategy Colin Clarke said that both ‘targeted support’ and ‘simplified advice’ will be “the most impactful” in helping bridge the advice gap. However he called for this to be an option for consumer at the decumulation stage – at present this it outside the scope of these proposed changes.
These are two of the three suggestions put forward by the government to reshape the advice landscape. Aegon and AJ Bell have already indicated that they would back ‘targeted support’ as being the most likely to benefit most consumers.
Clarke says: “With only 8 per cent of adults in the UK receiving full financial advice, the proposals set out by the FCA are a positive step forward in helping more people make informed decisions about their financial futures.
“We think all three proposals have a role to play, but targeted support and simplified advice will be the most impactful in helping to bridge the advice gap.
“We’ve been working with the Investing & Saving Alliance (TISA) on proposals to introduce a regulatory regime aligned to targeted support. This will allow firms like Legal & General to do more than simply tell people they are at risk of not having enough income for retirement, and instead to suggest how much they should be saving or withdrawing, making guidance more tailored to their needs.
The changes could also allow us to recommend options that have worked well for people in similar situations.”
He says these proposals mark a “major leap in guiding people through their choices”. But he adds: “However, it will be crucial to clearly communicate the limits of targeted support and make sure individuals know when simplified or holistic advice may be beneficial.
“That’s why we believe excluding decumulation from simplified advice is a missed opportunity. We know that a significant number of people, usually those with smaller pots, access their pensions without taking regulated advice, and only a limited number make use of Pension Wise.
“Even with targeted support, individuals may need to go one step further if they don’t fit neatly into the ‘people like them’ category and need an answer to ‘so what shall I do?’. For example, people looking to purchase an annuity may need a recommendation based on factors such as like providing for dependents, choosing between fixed-term or lifetime options, and deciding on with or without guarantees.
“We look forward to discussing this approach further with the regulator, government, industry stakeholders, and consumer groups. This inclusive process is important for making sure we implement changes that will truly benefit everyone”.
