Consolidation. It’s a word used widely in financial circles. Consolidation of debt (translation: combining lots of different credit cards into one seemingly simple yet unmanageable whole). Consolidation of assets (translation: combining liabilities into one seemingly simple yet unmanageable whole). You get my drift.
So, consolidation is not always a good thing. I wonder if this will prove to be the case for a new government-run financial advice service.
Although it has yet to be given a name, this brand spanking new single advisory body will, according to ministers, be more efficient than the organisations it, er, consolidates.
Financial experts agree that we are better off without one of these: the much-criticised Money Advice Service. The scrapping of MAS was announced in the Spring Budget, one of the last acts of former Chancellor, George Osborne. It’s safe to say that this body – criticised for failing to help those most in need and for over-generous staff remuneration – won’t be missed.
But this new advice behemoth will also incorporate the Pensions Advisory Service and Pension Wise and, like MAS, be paid for by a levy on financial firms. So that’s a new public body offering debt advice, money and pensions guidance all in one place.
As you might expect, finance companies have welcomed the initiative, despite little information being available on how it will work and when it will launch. But they’re right to be positive. Despite ever increasing complexity when it comes to pensions, debt and financial planning, few people actually seek advice.
According to the insurer LV=, nearly half a million people a year retire each year without taking financial advice. Of those within five years of retirement, four in ten don’t plan to take any advice or guidance at all. Yet someone who takes advice and shops around for an annuity – a set retirement income for life – receives a 23 per cent increase.
John Perks, managing director of life and pensions at LV=, said: ‘LV= welcomes the introduction of a merged, single money and pensions guidance body as this will help people wishing to explore a range of issues at retirement such as debt and equity release.
‘We believe there should be a holistic approach to retirement income planning, taking into account the customer’s assets and exploring all the options available to them. All consumers approaching retirement need help navigating the options and choices available to them and guidance can be a good route to advice for those that need it. We therefore believe guidance for the over 55s should be mandatory for those that don’t take advice.
‘To ensure consumers get the most benefit from guidance, it’s essential that government and industry work together to make them aware of the new body and the options available to them in retirement.’
Richard Parkin, head of pensions policy at Fidelity International, added: ‘This is good news. Not being able to offer holistic guidance would have made it difficult for people to navigate the system and this decision complements existing work that the industry is contributing to. Having public guidance consolidated into a single organisation makes sense and we need to make sure it’s used. Our experience is that many have yet to appreciate the benefits of seeking expert help, especially around accessing pension savings. Thought will need to be given not just to the structure of the new body but how it will be promoted in a way that engages consumers so they see its relevance.’
The Government has a golden opportunity to help people live out a comfortable retirement. Let’s hope they don’t mess it up.
Helen Nugent is Online Money Editor of The Spectator
Comments