The government has announced plans for a ‘radical shake-up’ of advice to pension schemes in a bid to benefit savers and boost £1.6 trillion pension assets.
The plans were unveiled on March 12, and include opening up the market for financial advice services used by pension schemes to help trustees get better value for money, boost members’ retirement funds and reduce employers’ shortfalls.
Guy Opperman, minister for pensions and financial inclusion, said: “Changes we are proposing will have a positive impact on millions of people’s pension pots.
“The market sometimes restricts trustees’ ability to find the best value for money, meaning that defined benefit schemes are less affordable and more difficult to fund while defined contribution schemes face higher costs and reduced returns for members.
“We want trustees to be better equipped and engaged when accessing services which have a huge influence on decisions affecting how much their members will have to live on in retirement.”
It follows the Competition and Markets Authority’s (CMA) probe into investment strategy advice accessed by pension schemes. It found that trustees were often denied clear information which would help them when weighing up options – hitting retirement incomes.
As a result, the government is now acting to improve competition in financial advice services used by trustees of both defined contribution, which is used by the majority of pension savers, and defined benefit pension schemes.
This is to ensure better disclosure of fees and performance and to encourage closer trustee engagement when buying such services.
It will also enable more effective monitoring of compliance by The Pensions Regulator.
Alan Chan, director and chartered financial planner for IFS Wealth & Pensions, said: “I’m not sure it will be radically reshape the financial advice services used by pension schemes but hopefully it will get trustees more engaged in this process to ensure the interests of scheme members are looked after properly. Transparency and disclosure are a big thing these days so it should lead to trustees looking for better value for money for its members.”
The Department for Work and Pensions plans to consult on proposals later this year.
Aamina Zafar is one of the UK’s leading financial journalists. She has previously worked as a senior reporter at FT’s Financial Adviser. The award-winning journalist writes regularly on the IFA community, mortgages, pensions and financial regulation.
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