The governmentis to guarantee free face-to-face advice for all employees that retire in defined contribution (DC) pension schemes from April 2015.
Chancellor George Osborne announced in the 2014 Budget that everyone who retires in a DC pension will be offered free, impartial, face-to-face advice on their choices at the point of retirement.
The government will provide £20 million over the next two years to develop the initiative.
A new duty on pension providers and trust-based pension schemes will be introduced, which means they must offer this ‘guidance guarantee’.
Providers and trust-based schemes will also be required to ensure the guidance follows a set of robust standards.
These will focus on helping DC members to:
- Understand the choices available to them at retirement.
- Engage with products and providers confidently.
- Access professional independent financial advice.
The government will ask the Financial Conduct Authority to coordinate the development of these standards and explore the extent to which regulated advice can be made more affordable.
It has opened its Freedom and choice in pensions consultation to obtain views on the way to implement this guidance. This will close on 11 June 2014.
Darren Philp, head of policy at The People’s Pension, said: “This is much needed. The government’s current policy of defaulting people into pensions and then leaving them in the lurch when it comes to their retirement was no longer fit for purpose.
“We’ll need to study the detail of what the government is proposing and how this will be paid for, but anything we can do to help people get better retirement outcomes is well worth exploring.”
Paul Macro, partner in the DC and savings team at Mercer, added: “We welcome the ‘right-to-advice’ initiative but it needs to be sustainable and genuinely available to all retirees both at the point of retirement and beyond.”