Do you need help picking the perfect pension?

Hi all

I thought you might find the following info about the Money Advice Service’s proposal for its directory useful. Do let us know what you think.

The Money Advice Service has proposed that advisers would need to satisfy certain criteria before being included in the directory, and the criteria would be agreed by an independent panel of industry and consumer representatives. The aims of the criteria are to ensure that:

- all customers would be provided with advice irrespective of size of pension pot
- comparison between firms would be facilitated through provision of information in a standard format, including fees (advisers will be asked to provide example costs for specific services)
- all advisers listed in the directory will have an appropriate specialism in retirement planning

Advisers would not pay to be included in this directory. Money Advice Service also found that in some commercial directories advisers pay to appear higher on the list.

The Money Advice Service consultation does not seem to be about pensions overall. It seems to be more about advice on pension income choices and developing a pathway to sell its consumers regulated advice. Pension advice needs start some 50 years before that.

It is neither necessary nor appropriate for advice to be provided for all pension pot sizes. In a lot of cases the cost of the advice would consume the whole pension pot. In many others the advice would be so costly that it would eliminate all chance of gaining from the advice. The small sum and triviality cases provide some guidance on the values at which full advice may just not be cost-effective for the consumer.

Consultation Question 1:
Do you agree there is a need to improve the customer journey towards regulated financial advice?

Yes. In particular in four areas:

A. Signposting when advice is not likely to be worthwhile due to costs and limited benefit potential, with particular relevance to small pots, triviality levels and the relative simplicity and certainty of buying additional state pension or deferring.
B. Evaluating whether MAS budgeting for a directory would be better spent on earlier notices to consumers so that they may be prompted to seek advice at a more appropriate time than near to or after retirement. Periodic combined state and other pension statements for all below retirement age, for example, perhaps at ten year birthday points or where records of pension holdings show no sign of adequate provision.
C. A trend in the mortgage market to try to force people who do not need advice to have advice, which is effectively forcing paying of an advice tax by those who do not need advice for products that, to them, are not particularly complicated. Mandatory advice of guidance in the pension area seems to be contemplating a similar advice tax even where it is not useful.
D. Noting that advisers appointed by workplace schemes or pension plans will not necessarily have been appointed with the best interests of the individual in mind but rather the best interest of the employer or pension scheme, and as a result are not likely to be the best available choice for an individual. Mandating schemes providing advice would end up charging people to get advice from a place that is not the most desirable, resulting in effective double charging for advice.

3.2 The new Money Advice Service online retirement journey
Stage 1: Thinking about retirement – “Finding out where I stand”

That's good. And of course this will presumably include these things or have to signpost that a deliberate choice has been made to give incomplete guidance:
a. all of my income streams, not just pension pots but ISAs, downsizing a home.
b. all of my cost changes, from reduced travel and clothing costs to possibly lower entertainment budgets and how this may change over time during retirement, to help signpost that level inflation-linked income is probably not the best choice for all income?
c. the "fuzzy" projection will presumably include back-testing similar to that provided by Firecalc so that people can assess what sort of safety margins they would like with their pension contribution amounts to have the level of confidence in their success that they desire. And of course it will presumably include the effect of the state pension(s) on the success or failure probability and a range of target incomes from minimal to desirable and plenty so that it is not presented as a purely success or failure choice.

I think it is rather unlikely that MAS actually plans to offer an adequate fuzzy projection that will really give people a good idea of their likely position and enable them to understand their options and choices. It seems rather more likely that it will seek to establish the idea that it is complicated and a professional and simply taking what the professional says is the way to go, removing effective informed choice from the consumer.

I would place significant value on such a tool, if one was ever developed and made broadly available to the whole UK population so that pension planning can start and be maintained throughout life.

3.4 Guidance guarantee
This section is worrying, for it appears to envision that the guidance should be primarily a sales pathway to paid advisers, explaining to consumers how complicated things are and that they will need paid advice to make a good choice, rather than seeking to educate them so that they can make the choices themselves.

Consultation Question 2:
Do you agree any new directory should also include details of advisers who specialise in the post-retirement advice market?
Yes. However, the sort of planning envisioned for care needs is something that needs to be considered prior to retirement income choice, and ideally earlier, for it's one reason to favour income drawdown or lump sum based choices over annuity purchase or state pension deferral funded by spending some or all of the pension pot. Make an income choice that eliminates capital and the remaining care funding choices can all be undesirable.

Consultation Question 3:
Do you agree that a new retirement adviser directory might provide a solution for consumers needing regulated retirement advice?
Yes, though I am very concerned that it may end up being signposted by MAS as always required instead of MAS producing educated consumers.

Consultation Question 4:
Do you agree that information regarding fees should be included in the directory?
Yes

Consultation Question 5:
If so, do you have any views as to how this might be presented to consumers? For example, should there be a ‘menu’ or list of services with average or approximate costs given for each service?
Normal search options such as price priority, locations served, not just location of the advisor.

Consultation Question 6:
As well as contact details, qualifications and expertise, type of service offered and fees charged is there any other information you think the directory should include on the adviser firm or individual advisers?
Feedback services that may contain comments by consumers on the services provided. Summaries of complaint numbers whether to the firm, FCA or Trading Standards. Link directly to the FCA page disciplinary history for the firm and individuals. Summary of FOS cases involving the firm. Links to common web search engines to help find more information about he firms, including possible negative or positive information.

Consultation Question 7:
Do you agree that an independent panel should decide upon the entry criteria for the adviser directory?
Yes, but with the caveat that the panel must be consumer-focused not industry driven.

Consultation Question 8:
Do you agree that the main consumer and adviser professional bodies should be invited to join the independent panel? If so, can you suggest the particular bodies you feel should be invited to be members of the panel?
No, I do not think that it is desirable for professional bodies to have a strong voice on the panel, though advisory membership may be useful. The customers are those who should be driving what the requirements are, not the providers.

Consultation Question 9:
Do you agree that the Money Advice Service should host the directory?
It's not a bad choice, though how well does it integrate with established searches such as for annuities or pensions (meaning -pensions schemes, not income products)?

Consultation Question 10:
If not, is there another organisation you feel should host the directory?
Not any established pension service provider.

Consultation Question 11:
Do you agree that data management and verification plus on-going maintenance should be outsourced to a suitable organisation and paid for by the host organisation?
I do not agree, assuming that "host organisation" means some reason for the host organisation to try to make money from referral fees rather than remaining completely neutral.

Consultation Question 12:
Do you have any suggestions as to which organisations should be invited to tender for the data management and verification services?
Established outsourcing firms that make no significant revenue from the provision or pension, retirement or investment services.

5.1 Benefits of a new directory – the customer perspective
"would also feel confident that a full list of all advisers that meet their specific needs had been presented to them."
I do not agree that the proposed directory would provide a full list of advisers that meet their specific needs. It appears to be envisioned that it will include only regulated financial advisers who provide advice as a for profit business and not unregulated advice or not for profit sources. The directory and plan overall seems to be in many ways aimed implicitly at being a lead generation service for regulated advisers.

Easy to compare
"Because advisers would be asked to supply information about their services in a standard format, it should be easier for consumers to compare firms and advisers."
I do not agree that the proposed directory appears to provide an easy comparison service. It appears far more likely to provide superficial comparisons that do not give any significant guidance on the relative quality of the guidance that would be provided, or even its likely nature.

"Having a clear journey will help with people’s attitude to financial advice and motivate them to take action since they would be able to access advice easily and safely. In turn this would improve their financial capability."

It is quite possible that the approach described would cause me not to recommend use of the MAS site for retirement income guidance. I am not satisfied that the MAS is going to provide an adequate degree of education vs being a lead generation tool for advisers. I am unlikely to direct people to such a location unless I have previously determined in advance that regulated advice will be the best choice for the specific individual concerned.

5.2 Benefits of a new directory – the adviser perspective
"Subject to the criteria laid down by the independent panel, it is envisaged that only firms offering a full advice service would be invited to join the directory. This would remove the concern of the Financial Conduct Authority, consumer groups and the industry that some consumers are purchasing regulated products without receiving regulated advice, but are unaware of the consequences of this action."

I am concerned that the MAS may be taking the approach of assuming that regulated advice is necessary and appropriate for all and may not be providing sufficient attention to proper education of consumers. I am concerned that, as appears to be happening in the mortgage area, there may be assumptions made that all consumers are incompetent to learn and make their own decisions, thereby ending up reliant on advice instead of becoming properly educated and informed consumers.

"The creation of a single definitive directory in this area has the capacity to reduce duplication and overheads associated with running multiple directories/referral services."
I do not agree that there is any prospect of this becoming the single and definitive directory so I do not agree that it will reduce duplication or overheads.

5.3 Summary
"all advisers returned in the search would be"
"willing to deal with them irrespective of the size of their pot;"

This appears to be a highly undesirable feature, contemplating a cross-subsidy of some consumers by charges paid by others.

The appropriate services will depend on the specific needs and in particularly the amount of money available to the individual. It is nonsensical to expect a firm that does very involved planning to provide it at a price that would make sense for a small pot size and it is similarly unlikely to be desirable for a consumer to be directed to such firms when much more limited advice of guidance will be more appropriate on a cost-benefit basis.

Consultation Question 13:
Are there any other benefits to consumers or advisers in establishing a new directory?
Perhaps, though the detriments are uppermost in my mind at present.

Consultation Question 14:
Are there any disadvantages of establishing a new directory that we have not envisaged?
Covered earlier, it seems in many ways to be intended to be used as part of a railroading to paid regulated financial advice regardless of individual need or appropriateness and to doing that instead of providing high quality education of consumers.

To the extent that this proposal may make it easier for pension providers and employers to avoid charging their customers and employees repeatedly - once per pension pot/employer in fees or ongoing charges - for advice it seems likely to be useful to consumers.

MSE_Aileen wrote: »

- all advisers listed in the directory will have an appropriate specialism in retirement planning

This isn't necessary. Qualified to appropriate level is what the FCA demand, so why should it be any different?

Generally though, I'd be interested to see the results of the consultation. This thread isn't for me to comment on - but I hope the consensus shows that IFAs are needed now more than ever.

Although the need for professional advice hasn't changed (it's always been important). I think the good thing from the pension changes (via RDR, Auto-enrolment, Budget 2014 and Queen's speech 2014) is that it has brought attention to the subject and been an eye-opener for many.

I am happy James, and you must be made of sterner stuff than me lol.