Pensions firms were warned by the Chancellor this morning to keep away from advising people on what to do with their retirement pots, although they effectively will be forced to pay for independent advice for retirees.
George Osborne said that the guaranteed guidance on pension choices offered as part of new rules announced in this year's Budget must be provided by independent organisations rather than pensions schemes or providers.
He 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".
Osborne 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 decision follows years of concerns that annuities may have been missold as pension providers were allowed to effectively put people into the firm's own products, irrespective of whether they were the best or most cost-effective option.
Osborne's statement draws a line under that practice and he claimed that some 18million people will be able be to benefit from the changes, which come into force in April 2015.
Pensions guidance in the future will be offered through a range of ways, including web-based, phone-based as well as face-to-face, through organisations such as the Pensions Advisory Service and Money Advice Service.
The advice will be free to the consumer but will be paid for by a levy on regulated financial services firms, the Treasury said.
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."
The Treasury also confirmed 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.
Responding to that Standard Life said: "We are pleased the Government has ensured that private sector employers retain their right to manage their affairs in the interests of their businesses and employees.”Reuse content