Speaking at a roundtable yesterday, the ABI said that until Osborne’s pledge to provide financial guidance to every retiring member of a defined contribution (DC) pension scheme was clarified, advice should be provided by not-for-profit organisations such as The Pensions Advisory Service (TPAS) rather than providers who are "not in the best situation to deliver it".
"Badge of shame"
But head of retirement insight at Fidelity, Alan Higham, said relying entirely on organisations such as TPAS for advice was an unrealistic demand that would create a “huge void” in the sector.
“There is no doubt that providers as a whole cannot easily be trusted,” he said. “Some providers do however provide excellent guidance and advice.
“We believe that providers can and should be encouraged to guide their customers to the right outcome. Being unable or unwilling to do that properly should be a badge of shame not honour.”
Higham then doubted the capabilities of voluntary organisations in providing advice to the one million UK people who currently engage in financial planning, and raised concerns over what options they will then have for guidance.
He added that the Financial Conduct Authority should “learn lessons” from its advisory reviews by creating and endorsing a set of minimum standards to be met by all those providing help to customers at retirement.
Impartial advice
The ABI roundtable follows comments made by ABI director Otto Thoreson early last week. He said all advisory solutions needed to pass an “impartiality test” where advice would be judged as “objective, sales free and neutral of commercial interest”.
He added that the ABI was yet to decide its stance on the impartiality of providers: “We believe the impartiality of organisations like the Money Advice Service, Citizens Advice and The Pensions Advisory Service, who already operate in this space, means there has to be an important role for them in any solution,” he said.
“The Budget is a game changer for savers. Our responsibility, across the whole of the financial services industry, is to make sure the customer gets a good outcome.”
The Pensions Advisory Service is an independent voluntary organisation granted aid by the Department for Work and Pensions. It provides information and guidance to members of the public on all pension matters.
"Suitable advice"
In April, the FCA issued guidance to financial advisers and pension providers to give “suitable advice” to customers when they are making post-Budget decisions about their retirement income.
The regulator told companies to give customers cash access to their pension funds if requested, after the maximum taxed lump sum was increased to £10,000 in the Budget.
It said it expected companies to review and revise their existing practices in light of this.
