Advice service chief executive manages expectations ahead of April roll out
It’s the first week of September and the holiday tans at the Westminster Employment Forum were deep. However it was back to school for the delegates at this event, which had been convened to explore the government’s plans to reform the retirement income market.
And while costs and charges were the subject of heated debate during the first half of the morning-event, the focus turned to guidance after the coffee and biscuits.
It’s an issue that is becoming even more pressing, given that in just over six months the industry will be dealing with hundreds of thousands of savers wondering what to do with their pension pots.
They will all get a guaranteed minimum level of guidance, which the Treasury has said will be administered by voluntary bodies like The Pensions Advisory Service. TPAS’ chief executive Michelle Cracknell was on the forum’s bill.
She was candid that things wouldn’t run completely smoothly from day one.
“We would love to get 100% take-up, but we are not going to get that,” Cracknell said, adding that 50% engagement would be a good result with the final figure more likely to be 20 to 30%.
However she was optimistic that TPAS would be able to find sufficiently qualified individuals with the five years minimum pensions experience deemed necessary to deliver the guidance.
Cracknell said the advisors being laid off by the annuity providers, due to the post-Budget collapse in their business, provided a rich pool of potential recruits for her organisation, which had already begun recruiting to fill the new roles.
“We are confident that there will be sufficient people in the market. We are hoping that this will be a virtuous circle and we can take some of these people on, if and when the Treasury tells me what part of the guidance we will be delivering.”
Earlier in the day Stephen Soper, interim chief executive of The Pensions Regulator, had reassured delegates that it wasn’t the job of his organisation to double up the guidance work to be carried out by TPAS and the Money Advice Service. “We won’t be creating a parallel universe to the work being done by TPAS and MAS,” he said.
“At no net cost to the consumer without a levy to set it up, you could deliver a national advisory service”
However Alan Higham, retirement director at Fidelity, warned that the guidance likely to be on offer would be insufficient: - a “half-finished job” and “not good enough.”
He argued that full blown advice could be offered to consumers at no greater cost than they are effectively being forced to pay now for an annuity.
Higham estimated advice could be provided for £600 to £700 per head, which was less or about the same as most pay for an annuity.
He said: “At no net cost to the consumer without a levy to set it up, you could deliver a national advisory service. I urge politicians to revisit this point.”
However, with less than 150 working days until the Budget reforms are due to be implemented, the civil servants taking notes at yesterday’s event will be reluctant to follow Higham’s advice.