Osborne stops pension providers giving advice

Chancellor says levy will finance free service for retirees

Personal finance editor

Pension firms will not be allowed to advise people on their retirement options from next April, but they will effectively be forced to pay for independent advice for retirees.

The Chancellor, George Osborne, yesterday filled in much of the detail around the new pension freedoms he announced in his March Budget, which was largely welcomed by consumer groups but left much of the pensions industry still warning of potential problems.

Crucially, Mr Osborne said the guaranteed guidance on pension choices offered as part of the new rules must be provided by independent organisations rather than pension schemes or providers.

The advice will be free to the consumer but will be paid for by a levy on regulated financial services firms. 

The Chancellor pointed out that Treasury research showed that “consumers would not trust guidance given by a person or organisation with a vested interest in selling a financial product or service”.

He said: “We’re making sure that people have the right support to make their own choice about how best to finance their retirement. Everyone with defined contribution pension savings reaching pension age will get free and impartial guidance.”

The changes follow years of concerns that annuities may have been mis-sold as pension providers were allowed to effectively put people into their own products, irrespective of whether they were the best or most cost-effective option.

Mr Osborne’s statement draws a line under that practice and he said that some 18 million people would be able to benefit from the changes, which come into force in April next year.

In the future pensions guidance will be offered through a range of channels, including web-based, phone-based as well as face-to-face, from organisations such as the Pensions Advisory Service and Money Advice Service.

Pensions expert Ros Altmann said: “The guidance opens the door for new and better products, as well as improving financial literacy nationwide. It could be the start of a whole new industry, which will ensure people have a better idea of how to plan their finances and how to assess their retirement options.”

Richard Lloyd at Which? said: “It’s essential that people facing retirement get personalised, impartial support to navigate some of the most radical changes to the pensions market in decades, so it is absolutely right to separate this from sales processes. This decision will help avoid potential conflicts of interest when guidance is given.”

But Neil Lovatt of Scottish Friendly said of the free guidance plans: “This feels a bit like window dressing on the part of the Government. It’s a solution that cannot possibly cope with the level of demand that should be placed upon it – which leads me to believe that it won’t be implemented properly.”

Meanwhile Nigel Barlow at the special insurer Partnership warned that the levy could hit financial advisers. “The suggestion that financial advisers may need to fund up to 30 per cent of the guidance costs came as somewhat of a shock to the industry as a whole and further clarification is needed around this.”

The Treasury also confirmed yesterday that it will allow new pensioners in private sector defined-benefit schemes to transfer into defined-contribution pension schemes, but with two new safeguards: a requirement to take advice and new guidance for trustees of the existing schemes.

Independent Partners: 10 top tips for retirement. Get your free guide here

Arts and Entertainment
The Doctor and Clara have their first real heart to heart since he regenerated in 'Deep Breath'
TV
News
people
Life and Style
Apple showed no sign of losing its talent for product launches with the new, slightly larger iPhone 6 making headlines
techSecurity breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
News
The official police photograph of Dustin Diamond taken after he was arrested in Wisconsin
peopleDownfall of the TV star charged with bar stabbing
PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

    Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

    Selby Jennings: Quantitative Research | Equity | New York

    Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

    Selby Jennings: SVP Model Validation

    Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

    Selby Jennings: Oil Operations

    Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

    Day In a Page

    A timely reminder of the bloody anniversary we all forgot

    A timely reminder of the bloody anniversary we all forgot

    Who remembers that this week we enter the 150th anniversary year of the end of the American Civil War, asks Robert Fisk
    Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing

    Scarred by the bell

    The downfall of the TV star charged with bar stabbing
    Why 2014 was a year of technological let-downs

    Why 2014 was a year of technological let-downs

    Security breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
    Cuba's golf revolution: But will the revolutionary nation take 'bourgeois' game to its heart?

    Will revolutionary Cuba take 'bourgeois' golf to its heart?

    Fidel Castro ridiculed the game – but now investment in leisure resort projects is welcome
    The Locked Room Mysteries: As a new collection of the genre’s best is published, its editor Otto Penzler explains the rules of engagement

    The Locked Room Mysteries

    As a new collection of the genre’s best is published, its editor explains the rules of engagement
    Amy Adams on playing painter Margaret Keane in Tim Burton's Big Eyes

    How I made myself Keane

    Amy Adams hadn’t wanted to take the role of artist Margaret Keane, because she’d had enough of playing victims. But then she had a daughter, and saw the painter in a new light
    Ed Richards: Parting view of Ofcom chief. . . we hate jokes on the disabled

    Parting view of Ofcom chief... we hate jokes on the disabled

    Bad language once got TV viewers irate, inciting calls to broadcasting switchboards. But now there is a worse offender, says retiring head of the media watchdog, Ed Richards
    A look back at fashion in 2014: Wear in review

    Wear in review

    A look back at fashion in 2014
    Ian Herbert: My 10 hopes for sport in 2015. Might just one of them happen?

    Ian Herbert: My 10 hopes for sport in 2015

    Might just one of them happen?
    War with Isis: The West needs more than a White Knight

    The West needs more than a White Knight

    Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
    Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

    'The day I was shot by the Taliban'

    Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
    Revealed: the best and worst airlines for delays

    Revealed: the best and worst airlines for delays

    Many flyers are failing to claim compensation to which they are entitled, a new survey has found
    The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

    The stories that defined 2014

    From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
    Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

    Disaster looming? Now you know where to head...

    Which British city has become the first to be awarded special 'resilience' status by the UN?
    Finally, a diet that works: Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced

    Finally, a diet that works

    Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced