Guidance must be independent of providers in order to give consumers a holistic view of the market and of all the options available. Otherwise, there is a risk that unscrupulous providers will take the opportunity to funnel customers solely to their own products and will not encourage customers to choose what is best for them, resulting in an unsuitable decision that cannot be undone.
Therefore, we believe that providers should only offer ‘information’ and the Government should make clear the distinctions between regulated advice, impartial guidance, and information, so consumers are completely clear on the differences.
Some people may think that this reform doesn’t go far enough. Throughout the lifetime of the Bill to date, the inclusion of what was called ‘default guidance’ has been flirted with.
Earlier this year, the Government removed the amendment to the Financial Guidance and Claims Bill that could have meant people were required guidance when accessing their retirement funds.
However, despite initial concerns that the reform was being watered down, we’re pleased to see the current amendments would still require pension schemes to make sure people accessing their savings are referred to guidance and have either received it or opted out.
It is therefore an extremely positive move that the amendments have been tabled and it will provide a clear ‘nudge’ to guidance. This is particularly significant as there is currently a low take-up of Pension Wise, despite very positive feedback from those who have used it.
The Bill will send a strong message that Government believes no one should be left unsupported when it comes to accessing their pension.
While people are – rightly – able to do what they choose with their money now, we believe Government and industry alike have a responsibility to take risk out of product distribution and ensuring people are significantly more educated and supported to make the best decision for them.
As the Bill awaits its final stages in the House of Commons, we urge MPs to accept the amendments as there are thousands retiring each week that could be better off if they sought guidance before making a decision.
The success of this will also lie in industry supporting the FCA as they are tasked with implementing the rule. It’s crucial the FCA gets it right as we know consumers will often choose the path of least resistance, so the process must be as smooth and as user-friendly as possible.
We look forward to working with the FCA to help the regulator determine the best way to have a conversation about guidance with retirees and ensure they get the best outcome from their hard-earned pension savings.
