“At a high level the principle of giving people control over the money they have saved is compelling and it certainly makes good populist politics”, says Kevin Legrand, Head of Pensions Policy, Buck Consultants at Xerox
“However, the speed at which these reforms are now coming increases the risk that they will not be properly thought through and will inadvertently build in problems that will only become apparent later. Pensions and savings involve complex principles, and most people need help, particularly in arranging income for when they cease paid employment. After all, that is what pension saving is specifically designed for.
He continues, “Although some will be able to access help, history tells us that many more will not do so, for many reasons. The Guidance Guarantee is looking as though it will only provide a very limited service.
“The result is that the burden will fall upon the providers and workplace schemes that, even where they are merely implementing members’ instructions, will be at risk of future complaints from members whose expectations are not borne out. Moreover, members do not understand the niceties of the distinction between “advice” and “guidance” that the financial services industry has to work with.
“These reforms need to be accompanied by an effective assistance system, and a clear legislative ‘safe harbour’ provision that gives an indemnity to a provider or scheme acting reasonably and in good faith to help members with their decisions. Such provisions should not be rushed, so need to be carefully considered and drafted”, concludes Legrand.
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