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11 June 2014

The Association of Professional Financial Advisers (APFA) has today responded to the Treasury’s consultation on freedom and choice in pensions, setting out its thoughts on the proposed offer of guidance for all retirees who hold a defined contribution pension pot.

 

Chris Hannant, Director General at APFA, said:

“While the offer of guidance is a positive first step, there is a vital role to be played by regulated advice. Guidance can provide people with an understanding of the products available and the tax implications of different options, but it cannot provide specific or tailored recommendations; only professional financial advice can do that.

 

“The guidance process must provide people with the confidence they need to make the next step, including making an appointment with an adviser when that is appropriate. It should also make clear that an initial conversation with an adviser costs nothing, and that, by helping people to make optimal choices, advice usually pays for itself within a few years through increased pension income.

 

“It is important that there is flexibility around the delivery of guidance. Consumers should be able to decide whether they’d prefer to receive guidance online, by phone or face-to-face. Guidance also needs to be impartial, and it is vital there is clarification on how this will be defined. We believe MAS and TPAS are the best organisations to deliver the guidance, as they already have the relevant infrastructure in place.

 

“But guidance will not be enough for many consumers. Those in complex situations or with pots of more than around £30k are likely to benefit from regulated advice to get the best outcomes from their pension savings. To ensure there is an effective hand-off from guidance to advice, there needs to be a directory of advisers. This should be created using funding from the £20m set aside by the Government for this project.

 

“MAS has proposed to create and operate this directory, and APFA has been working with MAS to consider how to maximise sign-up among advisers and determine what information consumers will need. However, we do not support MAS’s suggestion of further standards for advisers. Standards for regulated advice are already very high following the implementation of RDR, and advisers are well used to providing pensions advice. Any further conditions would make the directory unattractive for advisers so take-up would be low and consumer choice would be reduced.

 

“Most of all, consumers will need to be confident that both advice and guidance will help them achieve the best outcomes in retirement. There is no guarantee consumers will take up the offer of guidance, and if the process is cumbersome or they feel they are being force fed a sales process they will be turned off. Good communication is essential, and awareness needs to be built up over time.”

 

To read APFA’s full response, please go to http://www.apfa.net/policy/responses/APFA-response-HMT-freedom-and-choice-in-pensions-june-2014.pdf.

 

 

ENDS