Editorial: When is advice not advice?
The great advice versus guidance debate of 2014 is gathering apace. Let us step back for a moment and consider it from the viewpoint of the person on the Clapham omnibus.
Is the average saver going to understand that what they are getting does not constitute advice? When he or she is reaching retirement, will the distinction between being guided towards the right decision and being advised on the right path be meaningful?
I was one of those that tweeted chancellor George Osborne's pledge at the dispatch box that “everyone who retires on these defined contribution pensions will be offered free, impartial, face-to-face advice”.
The Treasury’s accompanying document replaced this with “free and impartial face-to-face guidance”. The chancellor, or those who helped draft the Budget speech, was being either knowingly or unknowingly sloppy with language.
But if the man leading the Treasury finds it difficult to distinguish between the two, how is the average saver supposed to do so?
Illustration by Ben Jennings
That’s not the point, I hear you say. As soon as the guarantee was made, inevitably providers and employers were to be left with much of the cost of procuring the advice, or providing the guidance.
The more we hear about it, the greater the apparent burden. This will be a guidance “conversation”, rather than a one-off interview.
This is unsurprising. People cannot be expected to make one of the most important financial decisions of their lives on the basis of a single chat.
The timetable is tight, but the government has tied itself to the mast of its flagship pension reforms, and now needs to deliver for those employers that have soldiered through the complexities of AE.
An interesting place to look will be how Nest delivers this guarantee, as it grows well beyond its millionth member and starts to set the agenda.
It will certainly provide a template for other DC schemes. But could it go further and open up its guidance service to other employers that are struggling to meet this obligation?
That sounds like a public service obligation to me.
Ian Smith is editor of Pensions Expert. You can follow him on Twitter @iankmsmith and the team @pensions_expert.