Pension providers must ask applicants questions about matters that could materially affect the value of their pensions the Association of British Insurers (ABI) has told MPs.
These include information about financial dependants, health and inflation risk.The Pension Scheme Bill public committee was hearing evidence from industry experts ahead of third reading of The Pension Scheme Bill 2014-15 in the House of Commons.
The ABI expressed concerns about applicants who had not taken the offer of pension guidance and backed calls for a second line of defence in its evidence. This follows the government’s promise that millions of people will have the right to free and impartial guidance on how to make the most of the new pensions choices that will come into effect in April 2015.
ABI head of policy Yvonne Braun told the committee that “all providers of financial services in this retirement income space should make sure that they ask their potential customers a series of important questions. We have set this out in the ABI’s code on retirement choices as an obligation on all our members to ask customers about financial dependants, health, inflation risk and so on.
“We would like to see the FCA make clear its expectation that all providers of retirement income products from next April will ask customers the same questions and make sure that customers are aware of the same risks. It is not clear whether everybody is going to take up the guidance, so there needs to be some sort of second line of defence—guard rails, back-stops, or whatever you want to call them.”
Brunel Professional Risks is also concerned that consumers could become confused between the basic guidance proposed under the government’s scheme and the high quality advice offered by Independent Financial Advisers. “The ABI is right that there must be basic standards underpinning the guidance regime – but one-off and necessarily brief guidance will never replace the need for high quality professional advice for many clients. IFAs are highly qualified experts who can offer specialist advice to their clients. Advisers are authorised and regulated by the FCA, have studied for professional examinations and their advice is underpinned by professional indemnity insurance. The industry needs to make sure that people are clear about the difference between guidance and specialist independent advice.”
A report on the ABI’s evidence to the Pension Scheme Bill public committee has been published by Money Marketing.