In its report into the Budget published today, the TSC also upbraided the Chancellor for using the phrase ‘advice’ rather than ‘guidance’ in his Budget speech, saying his statement ‘could have been better phrased’.
The committee said face-to-face guidance must be available at no extra cost to individuals if they do not want to receive guidance through other channels.Face-to-face guidance, the cost of which is to be borne by the pensions industry, is more expensive than guidance delivered through other channels.
The TSC said the guaranteed guidance must be available to people well in advance of their retirement to help their decision-making – at least 12 months before retirement. It also wants a review of the Money Advice Service to be completed as a matter of urgency so it can play a role in developing the standards for financial guidance at retirement.
The report says people need to be aware that while the guidance is to be free at the point of use, the costs of firms providing it will borne by consumers. It wants the full average cost of the provision of the guidance by firms to be estimated and disclosed to consumers so they fully grasp the value of it.
The TSC says the guidance offered must:
– Be demonstrably impartial as to providers and type of product;
– Include at least an initial opportunity for face-to-face guidance;
– Be free at the point of use, with the costs of such provision made transparent;
– Make clear to every consumer exactly what is being offered, the limitations of the guidance, and what protection it gives consumers in the eventof detriment;
– Be offered from at least 12 months in advance of the consumer’s stated
retirement date; and
– Be co-ordinated with Government-sponsored guidance relating to long-term care.
A spokesperson for the TSC says: “The Chancellor’s commitment was for face-to-face advice to be available. Evidence to the Committee from a number of witnesses suggested a desire to use other channels. These will be appropriate for some customers but, in line with the Government’s pledge, it is important that at least for those who choose face-to-face guidance this is provided without financial detriment to the customer.”
Barnett Waddingham senior consultant Malcolm McLean says: “This is all very sensible. But we should be in no doubt that getting the new system up and running by April 2015 represents a considerable challenge for all concerned and requires urgent decisions to be made as to who is going to deliver this new guidance, in what circumstances and in particular how the face-to face undertaking can be guaranteed across the country as a whole.”
Hargreaves Lansdown head of pensions policy Tom McPhail says: “Suitable hand-offs will have to be built into the guidance process, for example on debt to the Money Advice Service, and for annuity purchase to a whole of market shopping around service. It will be vital to ensure that investors only buy a retirement income from their existing pension provider if that is genuinely a good decision and that they buy the right type of income.”