Pensions - Articles - Guidance guarantee introduced to help savers benefit


 Millions of people will benefit from a right to free and impartial guidance on how to make the most of the new pensions choices that come into effect in April 2015, Chancellor of the Exchequer George Osborne has announced.

 This follows the government’s consultation on how best to deliver the radical changes to how people access their pensions announced at the Budget.

 In total 18 million people will be able to benefit from the changes to pensions should they wish to do so.

 From April 2015 300,000 individuals a year with defined contribution pension savings will be able to access them as they wish when they turn 55 – subject to their marginal rate of tax.

 This is the biggest change to how people access their pensions in almost a century, removing the effective requirement for many to purchase an annuity.

 The consultation since the Budget has shown that these changes have been overwhelmingly well received, with individuals supporting greater freedom and choice, and the pensions and insurance industry ready for the challenge of creating new, flexible products, which better suit individuals’ needs.

 The government’s response to the consultation today confirmed that:

 - The guaranteed guidance on pensions choices will be provided by independent organisations rather than pensions schemes or providers
 - Even more people will be able to benefit from the new pensions flexibilities as the government will continue to allow individuals to transfer from private sector defined benefit schemes to defined contribution pension schemes – subject to two important new safeguards
 - A new override will be introduced so that pensions schemes are able to offer individuals flexible access to their savings and the pensions tax rules will be amended to allow providers to develop new retirement income products that are tailored to the needs of individual consumers

 Chancellor of the Exchequer, George Osborne, said:

 "It’s right to support hard working people that have taken the long-term decision to save for their future and I’m pleased that the responses we had to our proposals on making pensions more flexible have been overwhelmingly positive.

 We’re making sure that people have the right support to make their own choice about how best to finance their retirement and I’m pleased to confirm that everyone with defined contribution pension savings reaching pension age will get free and impartial guidance on their range of available choices at retirement.

 The government wants to ensure that guidance is trusted by consumers, and the vast majority, including most of the financial services industry who responded, said that consumers would not trust guidance given by a person or organisation with a vested interest in selling a financial product or service. It will bring together a range of delivery partners, including the Pensions Advisory Service (TPAS) and the Money Advice Service (MAS), which already provide guidance and support to consumers.

 People with private sector defined benefit savings will continue to be able to transfer to defined contribution schemes (excluding pensions that are already in payment), alongside two new safeguards to protect both pension schemes and the individuals transferring out.

 Guidance will be offered through a broad range of channels, including web-based, phone-based as well as face-to-face, and to remain free to the consumer will be funded by a levy on regulated financial services firms.

 The Financial Conduct Authority (FCA) have also today published a paper which consults on the elements of the guidance guarantee for which the FCA will be responsible: setting and monitoring the standards with which guidance providers will have to comply, making and enforcing rules on how contract-based schemes signpost to the guidance services, and adjusting the FCA’s existing conduct rules to support the introduction of the guidance guarantee and in response to the new flexibilities.

 Two new safeguards are being introduced to protect both individuals and pension schemes in relation to defined benefit to defined contribution transfers: a new requirement for an individual to take advice from an impartial financial adviser regulated by the FCA before a transfer can be accepted; and, new guidance for trustees on the use of their existing powers to delay transfer payments and take account of scheme funding levels when deciding on transfer values."

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