Guidance guarantee: where providers stand on gov't plans
Legal & General
Legal & General (L&G) renewed the debate around the government’s guidance guarantee when it hit out at plans to give providers a role in the service.
L&G chief executive Nigel Wilson said that an independent body such as the Money Advice Service or the Pensions Advisory Service, rather than insurers, should be in charge of giving guidance to customers approaching retirement.
Chancellor George Osborne unveiled plans to introduce a ‘guidance guarantee’ in the 2014 Budget, giving every workplace pension scheme member access to free and impartial face-to-face guidance at retirement. He also pledged the government would provide £20 million to fund the service for the first two years.
Wilson told the Daily Mail: ‘A genuinely impartial, independent body- not a product provider- has to be the organisation providing the guidance.’
However L&G wasn’t the first as Royal London set its stall and argued that guidance should be given independently of providers.
Phil Loney (pictured) group chief executive of Royal London, called on regulators to develop a new form of at-retirement advice which must be free from ‘provider influence’.
Instead, Loney said the free and impartial face to face advice needed to be developed with bodies such as the Financial Conduct Authority (FCA) and Financial Ombudsman Service (FOS).
He said: ‘What we really need is industry, FCA and FOS to come together to develop a new form of advice which is fit for purpose for customers looking to maximise their retirement income by taking advantage of the freedoms announced in the Budget.'
Partnership questioned the ability of providers to be impartial when providing the proposed guidance guarantee.
Kathryn Purves, chief risk office at Partnership, said: ‘We believe that this process needs to involve genuinely impartial guidance. We do not believe that it is possible for a company who has a vested interest in selling products to provide impartial guidance to consumers.
‘Instead we believe that providers should look to support independent organisations that can help consumers make the appropriate choices for their individual circumstances.’
MGM Advantage said providers’ reluctance to move to the Open Market Option showed that providers would not be impartial enough to offer the guidance guarantee.
Andrew Tully (pictured), pensions technical director, at MGM Advantage, said: 'While providers can help provide information to customers, I don't believe they should be part of the guidance service. That needs to be independent and impartial. Let's face facts, all the work over the past few years to increase the numbers of people shopping around, led by providers, hasn't been a success.'
LV= has argued that the guidance guarantee should be outsourced to a third party who is both independent and can accommodate the scale of the service.
John Perks, managing director of LV= Retirement Solutions, also said that although guidance may be sufficient for some individuals, in many cases regulated advice will prove to be more beneficial.
Perks said: ‘We believe that any involvement by pension providers in guidance would compromise the independence of any financial guidance given. Ideally, we believe guidance should be outsourced to an independent third party who have the ability to scale the service to meet demand.
‘This will ensure that consumers have trust in the guidance process and are able to make fully-informed decisions across the whole of market. It will also provide consistency.’
Friends Life agreed that a third party should provide the guidance, but that providers should continue to provide customers with information on their pensions savings.
Friends Life said: ‘We believe that the new "guidance guarantee" would best be delivered by a trusted independent third party as this would show true impartiality and would be in the best interests of the consumer.'
Standard Life was somewhat more reserved than its rivals in its opinion and said third parties ‘may’ provide the service instead of providers.
Jamie Jenkins, head of workplace strategy at Standard Life, said there was a consensus that the service would be provided by a combination of parties, including the Money Advice Service and the Pensions Advisory Service.
He also said: ‘The key here is that we first define what the guidance actually is. If it is a one-off event, probably a telephone conversation for most, then it may well be a third party, with providers in the first instance directing people to them.
'However, it should complement, not replace, the existing services offered to members by advisers, providers, trustees and employers in engaging people in the lead up to retirement and in many cases, beyond.’
Standing out from the crowd, Aegon said it wanted providers to be an integral part of offering the guidance guarantee.
Steven Cameron (pictured), head of business regulation at Aegon, believes providers are capable of being impartial with FCA’s regulation.
’We think it would be unduly restrictive and would limit capacity if providers weren’t allowed to also offer guidance, particularly when they’ve been doing so perhaps year after year for the same customers.
‘But we’re quite comfortable with the fact that we would need to do that in a way that could be proven to be impartial and proven to meet the government’s quality standards,’ he said.
Prudential hit back at its rivals’ criticism and claimed providers’ expertise should not be ignored.
Russell Warwick (pictured), distribution change director for UK and Europe at Prudential said that providers’ strength and experience that can benefit guidance should not be overlooked.
‘These strengths include the ability to identify and access customers who are coming up to retirement, expertise in the existing policies these customers hold and any guarantees included, and experience in providing the majority of the product solutions that are likely to be involved, both before and after retirement.’
‘Therefore dismissing out of hand the potential benefits of including product providers as part of the eventual solution seems in our view to be short-sighted at best.’
Just Retirement sided LV= and Friends Life and argued that the guidance guarantee should be provided by a third party company
The company said it is impossible for product providers to pass an impartiality test as they want and need to sell products, and that providers who treat their customers fairly should have nothing to fear from an external and impartial guidance service.
Stephen Lowe (pictured), group external affairs and customer insight director at Just Retirement, said: 'The individual should know when they have been through the government’s guaranteed guidance. It should be branded to achieve standout and a clear position relative to other commercial offerings in the market. It should feel different to the sales and support provided by product providers.'