Independent pensions guidance confirmed
Pension savers will have the right to free and impartial guidance on how to benefit from the pension reforms that come into effect in April 2015, the Treasury has announced.
From April 2015, around 300,000 people in defined contribution schemes will have greater freedom over how they access their savings, removing the requirement to buy an annuity.
Around 18 million are expected to be affected by the changes.
The latest announcements are part of the government’s response to a consultation into how best to deliver the Budget pension reforms.
The government has confirmed that:
- pensions guidance will be provided by independent organisations, not pensions providers
- guidance will be offered via the internet, phone and in face-to-face sessions
- the Pensions Advisory Service (TPAS) and the Money Advice Service (MAS) will partner with the government to provide guidance
- the free guidance will be funded by a levy on regulated financial services firms.
Chancellor George Osborne said:
“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.”
Reaction
Michelle Cracknell, chief executive of TPAS, said:
“Our experience from our helpline shows how essential good information and guidance is to helping people think through the choices they need to make for retirement but we know that many people put off thinking about retirement and struggle to know how to start.
“Having a personalised conversation with someone who understands the issues affecting people as they come close to retirement can be life changing.”
Otto Thoresen, director general of the Association of British Insurers, described the move as “sensible and pragmatic”:
“The ABI welcomes the government’s decision to deliver the Guidance Guarantee in cooperation with existing groups such as TPAS and the MAS following an in depth and thorough consultation process with the industry and key stakeholders.
“The ABI believes it is essential to adopt this approach to ensure that the Guidance Guarantee is ready for April 2015.”
John Cridland, director general of the Confederation of British Industry, said that providing millions of retirees with face-to-face advice would prove a “huge challenge”:
“The key to success will be swiftly expanding the infrastructure needed to accept tens of thousands of requests for guidance each year, and ensuring people receive high-quality advice to make informed decisions about their futures.”