We are the voice of insurance and long-term savings | Contact us

Chancellor must hold his nerve on pensions guidance delivery

Huw Evans, ABI Huw Evans, ABI

Politicians normally avoid hard start dates for pet projects like the plague so the stakes have always been high since Chancellor George Osborne chose a starting date for his pension reforms that falls slap bang in next year's general election campaign.

The challenge now is to ensure his 'guidance guarantee' is not downsized to something that is lower risk to roll out but that won't make much difference to those receiving it.

Frankly it is already alarming that just four and a half months away from the start date we don't know yet what is in it one way or the other (nor how exactly it will be paid for or linked in to providers).

While the Treasury is responsible for deciding the content of the guidance and delivering the online service, other critical partners also need certainty soon including the pension providers who have to signpost their customers to it, the FCA which needs to regulate it and the Government's formal delivery partners, Citizens Advice and the Pensions Advisory Service.

It is critical for the success of the reforms that the vast majority of customers use their new-found freedoms to make a choice that is right for them. 

It is very important at this stage that ministers hold their nerve and stick to their original plan of a broader based guidance service that can genuinely help people approaching retirement to consider everything they need to be thinking about to take decisions about their finances.

The output from the original consultation back in the summer said the guidance will be tailored to individuals’ personal circumstances and will cover welfare and social care. The FCA consultation referred to the key areas that people needed to think about in considering their pension options, topics such as levels of debt, number of dependants and tax status.

Yet the latest definition in the Pensions Schemes Bill is noticeably thinner, referring only to 'What to do with the benefits from a pension'. This is a very difficult judgement to get right for most people if you are not also thinking about how much you still owe on your mortgage and credit cards, how long your spouse or children are going to be relying on you, whether you are in receipt of means-tested benefits or a higher rate tax payer.

So all this matters. It is critical for the success of the reforms that the vast majority of customers use their new-found freedoms to make a choice that is right for them. That is what everyone involved - pension providers, consumer groups and formal delivery partners want to see.

The Chancellor was right to think a guidance service was a necessary ingredient in the new world of pension freedom; now he needs to ensure it is worth having.

Huw Evans is Director of Policy and Deputy Director General, Association of British Insurers (ABI).

Last updated 29/06/2016