Of interest to all schemes is the Government’s free and impartial guidance service to help those coming up to retirement and considering the Budget 2014 flexibilities to understand their options. On 12 January 2015, HM Treasury published an update on the progress made to date in setting up the new service “Pension wise: Your Money, Your Choice”.
The Government is committed to providing to every individual taking advantage of the new pension flexibilities free and impartial guidance on how best to use their pension savings. The Pension Schemes Bill, which is expected to receive Royal Assent in February 2015, provides the legislative framework for the guidance service.
The update notes that the new guidance service needs to:
- recognise that people may have a limited understanding of pensions;
- use language that is as clear, simple and straightforward as possible;
- cover the relevant ground without overwhelming consumers with information; and
- offer tools that will help consumers understand their choices by, for example providing an indicative tax calculator.
The update states that the Financial Conduct Authority (FCA) and TPR will seek to ensure that information and materials will support signposting individuals towards the guidance service, and agreed template communications will be made available to all pension providers and schemes. It also notes that individuals delivering the guidance must have the skills, knowledge and expertise necessary for the discharge of their responsibilities. The FCA is to consider whether a standardised pension information statement should be explicitly required.
The Government considers it important that the guidance service has an easily recognisable brand and logo, which it says will highlight the credibility of the service provided. Anyone trying to pass themselves off illegitimately as a guidance service provider will be subject to legal sanction. All guidance sessions, whether online, by telephone or face-to-face, must meet the FCA’s standards and initial research has indicated an optimum duration of around 45 minutes. The delivery partners will be the Pensions Advisory Service, and Citizens Advice Bureaux.
The Pension wise service will be financed by a levy estimated at £35 million, the largest proportion (12 per cent) of which will be paid by advisers, who face a bill of £4.2 million. The levy will be confirmed in March in the Financial Conduct Authority’s fees consultation paper.
View the guidance press release.