ABI wants second line of defence on guidance for retirees

From next April, defined contribution members will be given more flexibility to take their savings as they wish under reforms introduced in this year's Budget. Savers will also be given the opportunity of free and impartial guidance on the choice. 

Today’s count is 101 issues that we need to have clarified for schemes and trustees to be able successfully to implement the broader guidance guarantee issue

Joanne Segars, NAPF

Giving evidence on the pensions bill yesterday the ABI's assistant director, Yvonne Braun, said: “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.”

She added that it was not clear whether everyone would take up the guidance, so it was necessary to have some sort of safeguard. 

David Geale, director of policy at the Financial Conduct Authority, told MPs on Tuesday a second line of defence was something that could be looked into as the guidance guarantee developed. The regulator expects providers to be clear about what the guarantee is and to encourage take-up. 

Geale said: “So there is a question… about how far we want to take people who have made a decision not to take the help that is available, and about saying, ‘Are you really, really sure you did not want to take that help, since it is available?’

"That is a question that I think we will need to look at as the guidance guarantee comes into place.”

He added: “Our role is to monitor that, so we are developing our monitoring strategy for how we will work with the delivery partners to ensure compliance with those standards and that they do not stray into advice.”

Also on Tuesday Michelle Cracknell, chief executive of the Pensions Advisory Service, which has been named as one of the provider partners for the guidance guarantee, said the initial take-up of the guidance guarantee was expected to be 25 per cent of the 400,000 people the Treasury expects to retire on DC pots each year.

“We think [this] because of the nature of the calls we are receiving at the moment from people where the defined contribution pension is a very small element, who have other pension provision elsewhere. That suggests that there will be less interest in taking the guidance, because it is a smaller decision for the individual to take,” she said.

They are aiming for a 75 per cent take-up. “We will then need to work hard to drive it up, especially as defined contribution becomes a bigger element in people’s pension provision,” Cracknell added.

Joanne Segars, chief executive of the National Association of Pension Funds, also told MPs yesterday that the association had “101 known unknowns” that need to be clarified about the reforms.

She said: “It is a sort of fluctuating 101, but today’s count is 101 issues that we need to have clarified for schemes and trustees to be able successfully to implement the broader guidance guarantee issue.”

During evidence, MPs expressed surprise over Segars' answers on collective defined contribution, where she maintained there was very little demand from NAPF members.

“You might get different answers from different firms, from actuaries, but certainly when we speak to pension schemes their view is, ‘We might be interested in this over the longer term, but right here, right now, we are focused on the issues at hand’,” she said.

The Confederation of British Industry also said in evidence that they did not see significant interest in the risk-sharing schemes. Evidence will continue next week.