The latest battleground for financial firms and the government is who pays for giving consumers advice about pension reforms announced in the last Budget.
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Chancellor George Osborne shook the financial world by immediately scrapping restrictions on drawing cash from small pot pensions for retirement savers over 55 years old.
He followed up by extending the measures to cover all direct contribution pensions from April 2015.
The move followed months of negotiations with pension and annuity providers to give consumers a better deal.
Annuity providers gave little ground, so Osborne also dropped the requirement for pension savers to buy the product before the age of 75.
Annuity sales savaged
That has led to a drop in annuity sales of more than a third in just a few months.
Financial experts predict pension providers will lose funds worth around £5 billion in April as retirement savers draw down on their cash.
Osborne’s policies were welcomed by consumers, who now have easier access and more control over the way they spend their retirement savings.
However, the Financial Conduct Authority (FCA) wants to see consumers given free advice about the best way to manage their retirement money. To do this, the FCA wants to levy a charge on financial firms to fund the independent Money Advice Service.
Now, some financial firms are trying to gain a foothold in giving the advice by claiming only regulated firms should deal with consumers.
John Perks, managing director of LV retirement solutions, said: “George Osborne’s proposals give retirees more options about how they take their retirement income.
“We believe the proposals will greatly help people retiring with their finances and we would hope give greater engagement with the industry and better consumer outcomes, as people start to look at alternatives to standard annuities.”
Perks argues that from the questions providers are being asked, consumers are confused about their best pension options.
However, the FCA wants to separate providers from giving financial advice about pensions as under current rules, financial firms can only give information about their own products unless they are classed as independent.
The suspicion is providers want to give the advice they are paying for so they can still influence consumers to buy their retirement products and services, whereas an independent adviser should recommend the best product or service from across the market.
“We believe that guidance is the correct way to make financial outcomes better for retirees, but many would benefit from regulated advice, “said Perks.
“As a company, we are committed to helping advisers show consumers the value of retirement advice.”
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