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Calls for mandatory advice for accessing pensions



Posted on: 20th June 2019

Baroness Greengross, who sits on the Inter-generational select committee, has called for the government to make certain areas of accessing pensions require mandatory financial advice.

Whilst talking on the regulator’s ‘Inside FCA’ podcast, Baroness Greengross describes financial advice as paramount, however, does not know how big an issue is posed by retirees spending their pension savings unwisely but stated it required further investigation and thought.

Baroness Greengross said: “I think perhaps government should make it mandatory people do get advice or guidance when they want to get into their pension savings, because it’s fine spending it all on a lovely holiday or something until you realise what the costs of care are and you need them in the next six months.”

She added: “I think default guidance is very important there and perhaps that should be mandated.”

We agree with Baroness Greengross when she hails financial advice as ‘absolutely critical’ for younger generations to help them manage their finances and pensions over an elongated lifespan.

Mandatory advice already exists within Pensions

Since April 2015, mandatory advice has been in place for anyone wishing to transfer their Defined Benefit, otherwise known as final salary, pension scheme to a more flexible pension arrangement with a transfer value over £30,000.

This is to ensure that the recipient is fully and competently aware of the valuable guarantees and secure income that they would be giving up upon transfer.

A 2017 report by Just shows there is ‘broad consumer support’ for advice or guidance to be mandatory when accessing pension benefits. The only free guidance presently is provided via the government website, Pension Wise, and just one in ten confirm they have used this service before accessing their benefits.

An IFA market with extraordinary costs

However, no one knows how mandatory advice would affect an already stretched IFA market who face ever-increasing costs to operate with Professional Indemnity Insurance costs increasing by 600% in two years alone for Haven IFA with others being hit harder.

These uncontrollable, yet necessary, costs will ultimately lead to the consolidation of independent advisers and less choice for consumers which can have a bearing on the level of guidance being given.

Haven IFA will always offer advice to those who seek it when accessing their pensions to ensure a happy, secure, prosperous retirement to allow our clients to live in comfort.

Have a browse through our website and free-to-download guides to see what we do and what you should look for in an adviser. We strive to be leaders in our field having obtained by Chartered Financial Planner status and the Pension Transfer Gold Standard enabling confidence in our advice for our clients.