Pensions - Articles - Watered down pensions guidance service insufficiently robust


 Responding to the FCA Consultation Document, the LITRG has called on the Government to ensure that the pensions guidance service is sufficiently robust, with much tighter regulation than currently proposed, and that individuals providing a face-to-face service are adequately trained.

 The Group also calls for particular attention to be paid to the tax aspects of pensions.

 On 21 July 2014, FCA published a Consultation Document, the Retirement Reforms and the Guidance Guarantee. This was in response to the announcement in Budget 2014 that significant reforms would be introduced to the way that pensions might be accessed from April 2015, providing greater flexibility to consumers in the way they might access their pensions savings. The Government announced on Budget Day that individuals would be provided with “free, impartial face-to-face advice”. This has now been watered down so that guidance rather than advice will be given.

 Anthony Thomas, Chairman of LITRG, said:

 “We are very concerned that the short timescale for implementing these changes means that there will be a lack of adequate and fully trained staff to provide this service. Furthermore, consumers may assume that the guidance is actually advice and so not adequately explore their options.

 “While it appears that web-based guidance may be freely available, some consumers are digitally excluded and, given the importance of the decision to be taken, many are likely to seek face-to-face appointments. It is not yet clear which organisation(s) are to provide this face-to-face service, but ensuring adequate geographical coverage is essential.

 “Pensions savings may represent a significant portion of an individual’s wealth at retirement and it is crucial that consumers understand the choices they have and their financial implications.

 “In particular, the taxation implications of the various choices need to be properly explored in the guidance, both from the point of view of quantifying any charges, and also in establishing when and by what mechanism any liabilities are due to be paid. For example, in some cases delaying access to a pension until a subsequent tax year may result in a substantial reduction in tax liability.

 “As well as tax implications, there are also interactions with other state benefits, for example the state retirement pension, and we recommend that the guidance clearly describes which state benefits are taxable and how the tax due on them is to be collected. For low income families, understanding the interaction between their pension and any other state benefits to which they may be entitled is crucial.”

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