Responding to FCA consultation on retirement reforms and the guidance guarantee, Kevin LeGrand, head of pensions policy, Buck Consultants at Xerox says:
“There are considerable concerns about the viability of the current plans for the guidance guarantee and the proposed timetable for its deployment. In setting the deadline for completion of the guidance guarantee system, account also needs to be taken of the time it will take the pensions industry to produce the necessary documents and systems that will be needed to implement part of the requirement. It is vital that such a high-profile service, inseparable from the new DC retirement regime, is deemed a success by its customers from day one.
“If the details cannot be settled before the end of 2014, we suggest that a temporary solution be set up, which will of course require that there is at least one provider in place to provide guidance, even if it is only on an ad hoc basis. We recommend that an accurate number of the potential users of the service should be produced as a matter of urgency to underpin the development of the service.
“It is crucial for the Government to be absolutely clear on what guidance will entail, but more importantly, what it won’t. There will be a strong chance of misunderstanding amongst individuals as to what is being provided, given that many do not know the difference between guidance and advice. Many will be expecting more formal ‘advice’ rather than more general ‘guidance’, so there needs to be concerted and persistent effort to make it clear to those using the service what it exactly comprises of.
“Furthermore, for those who wish to take advantage of the guidance option, a period of six weeks gives insufficient time to identify a guidance provider, obtain guidance, and go through the whole thought/decision and execution process, including financial advice if appropriate. This is a difficult issue. If the new freedoms are to be available to all individuals retiring from April 2015, then it is preferable for these individuals to have access to the guidance, and to receive signpost, before retirement. However, if it is first raised with the six week reminder letter, it may confuse and upset individuals, particularly if they have already reached a decision on their preferred benefits and taken steps towards implementing them, without the benefit of guidance on the full range of possible options. To get the most from the new flexibilities, decisions will have to be made and reviewed throughout the member’s lifetime; investment decisions will in future have to reflect the whole period of membership until death. How does that fit with the concept of a single guidance event “at the point of retirement?”
“Taking all these points into consideration, we suggest that strenuous efforts need to be made to bring forward the date as far as possible for establishing the guidance guarantee service, following which, those individuals who are expecting to retire from early in the 2015/16 fiscal year are provided with meaningful help in good time for it to be of use to their deliberations”.
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