Govt should fund retirement service's first year, firm says

The Government should cough up the costs of the new retirement guidance service for the first year, a pensions firm believes. MGM Advantage has called for the Government to stump up instead of imposing the cost on the financial services industry.The company has also backed the creation of a single-page pensions passport to give the guidance provider all the information it needs to help consumers find the best value.Addressing the FCA's proposals for the guidance guarantee levy, MGM Advantage argued that appropriate industry levies cannot be set until the 2016/17 tax year, thus the first year should be funded by Government. {desktop}{/desktop}{mobile}{/mobile} This initial phase should be used to assess levels of take up for the service and relative benefit to different sectors.Andrew Tully, pensions technical director at MGM Advantage, said: "We believe there are significant issues with all three options for the guidance guarantee levy currently being considered by the FCA."The fundamental problem is there are two major unknowns: how many people will use the service, and which of the five fee block organisations will benefit and by how much."We recommend that the first year's levy should be financed by Government, especially as the Treasury should see significant benefit through additional income tax as retirees take advantage of new flexibility."The authorities can then assess how the guidance guarantee service is working in practice, and appropriate levies can be set for the 2016/17 tax year onward, based on how many people take up the service and which organisations benefit most."Mr Tully said the pension reforms fail to solve the problem of retirees not shopping around and therefore not getting the best deal.He said: "If people continue to roll over into their current provider's solution the market will still not be working properly."To be effective the guidance provider needs details about the individual's circumstances: their pension savings, their family, their health, whether they have any debt."We think the best way to achieve this is a single-page 'pensions passport' sent to consumers approaching retirement that can then be passed on to the guidance provider. This should contain all the relevant details, be free from provider branding and have a clear message on the importance of guidance and advice with appropriate contact details."If providers and schemes tell people about the availability of guidance in the midst of a large pack of information sent to a retiring customer, we are unlikely to achieve great take-up. So we believe wake-up packs should be abolished and replaced by the pension passport. This has significant cost savings to industry and more importantly will help customer understanding."Ultimately though, guidance is only part of the answer – it is also crucial that there are clear hand-offs from guidance to professional financial advice."

Govt should fund retirement service's first year, firm says

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