Osborne signals free pension advice

In total, 18 million people will be able to benefit from the changes to pensions should they wish to do so, the Treasury said

In total, 18 million people will be able to benefit from the changes to pensions should they wish to do so, the Treasury said

First published in National News © by

Millions of people will get free, impartial advice on how to make the most of their retirement savings under George Osborne's radical shake-up of the pension system.

The announcement follows a consultation on the reforms set out in the Budget, which increased the flexibility for people to access their pension pots.

The guidance will be delivered by a range of independent organisations, including The Pensions Advisory Service (TPAS) and the Money Advice Service (MAS) and follows concerns consumers would not trust information given by organisations with a vested interest in selling a financial product or service.

Chancellor George Osborne said: " It's right to support hard-working people that have taken the long-term decision to save for their future, and I'm pleased that the responses we had to our proposals on making pensions more flexible have been overwhelmingly positive.

"We're making sure that people have the right support to make their own choice about how best to finance their retirement and I'm pleased to confirm that everyone with defined contribution pension savings reaching pension age will get free and impartial guidance on their range of available choices at retirement."

In total, 18 million people will be able to benefit from the changes to pensions should they wish to do so, the Treasury said.

From April next year, 300,000 individuals a year with defined contribution pension savings will be able to access them as they wish when they turn 55, subject to their marginal rate of tax.

The Government's response to the consultation, published today, confirmed that the Government will continue to allow individuals to transfer from private sector defined benefit schemes to defined contribution pension schemes, subject to two new safeguards - a requirement to take advice before transferring and new guidance for trustees.

Pensions expert Ros Altmann, the Government's older workers' business champion, said: " The decision that guidance must be impartial and separate from the industry is a real game-changer and will help equip people to make the right decisions for them.

"The challenge is now firmly with the industry to develop the products that people need, rather than simply the products they wish to sell."

Caroline Rookes, chief executive of MAS said: " The Money Advice Service welcomes the Treasury's announcement that we will have a role in the provision of the retirement guidance guarantee.

"We have already been working closely with the Treasury, TPAS and others to provide our knowledge and experience in this area, and will continue to do so in the months ahead."

"We are pleased to have this opportunity to build on our existing work helping people as they approach retirement and with wider money issues.

"Planning for retirement is a crucial life stage, and it is important that people feel well-informed and confident in the decisions they make."

Consumer watchdog Which? welcomed the separation of pensions guidance from sales.

Executive director Richard Lloyd 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, and will mean consumers are more likely to trust the information they get and make the right decisions.

"It's now for the regulator to establish the highest possible standards for both the pensions industry and those who will provide the guidance, so that people get better value for money out of their hard-earned pensions savings."

Liberal Democrat Pensions Minister Steve Webb said: "As a liberal, giving people more control over their own money has always seemed absolutely right to me. We will give people the help and support they need to take advantage of these new freedoms.

"We are aiming to replace an economy built on debt with a stronger economy based on savings and investment. These reforms are making pension saving more popular, which will help us achieve that goal."

Labour pensions spokesman Gregg McClymont said: "Labour supports flexibility and choice in retirement, but the Government has to get the provision of free guidance right.

"Today the Government has continued to water down their commitment to the next generation of pensioners. First we had advice, which became guidance. Now face-to-face has become online or over the phone.

"While further clarity is welcome, there is a long way to go to meet the challenge of providing a gold standard service by April 2015 in order to ensure that people can plan adequately for retirement."

David Fairs, chairman of the Association of Consulting Actuaries, said: " We are sure that enabling consumers to choose the type of guidance that best suits them is the correct approach. Some will prefer to use websites, others the telephone and still others face-to-face discussions.

"We also welcome the Government's commitment to change tax rules so innovative products can be developed to meet the varied needs of consumers in retirement, including provision for long-term care."

TUC general secretary Frances O'Grady said: "The Chancellor's U-turn on who should provide guidance is welcome, but this rapid about-turn shows just how badly thought-through the Budget proposals were.

"Independent guidance is clearly better than that provided by company sales teams, but half an hour of the best possible advice will not equip people for what could be 30 years of managing their pension pot.

"The Chancellor's talk of personal responsibility, freedom and financial services innovation is exactly the same rhetoric that led to catastrophic pensions mis-selling in the 1980s."

The chairman of the House of Commons Treasury Committee, Andrew Tyrie, wrote to Mr Osborne to voice concern over MAS's involvement in the delivery of guidance.

Mr Tyrie said: "The Treasury Committee was clear that guidance provided under the guidance guarantee should be demonstrably impartial between insurance providers. Today's announcement by the Treasury that the guidance guarantee will be provided by independent bodies appears to meet this requirement, and is a step forward.

"It is concerning, however, that the MAS may play a part in the delivery of the guidance. The Committee has expressed serious concerns about the ability of the MAS to perform its functions, and has recommended that an independent review consider whether the MAS should exist at all as a statutory body.

"I have written today to the Chancellor, asking him to clarify the scope and limits of the role proposed for the MAS. Furthermore, the independent review should be allowed to consider both immediate improvements to the MAS and the question of its future as a statutory body. Without such an undertaking, the Committee would have reservations about a role for the MAS in an area as important as the guidance guarantee."

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