The guaranteed retirement guidance promised in the Budget should be offered to people at least 12 months before they stop work, the Treasury select committee recommended today.
In its wide-ranging report on the Budget, the MPs also said the provision of guidance and the complexity of the new pensions market would likely trigger a greater requirement for further support and financial advice.
In his March Budget statement, Chancellor George Osborne gave a 'guidance guarantee' and said face-to-face advice would be made available from April next year.
Committee chair Andrew Tyrie said: 'The "guidance guarantee", announced at the Budget, is an important part of making sure that consumers benefit from increased choice. We will measure the government's proposals for the guidance guarantee against a set of principles to ensure their effectiveness.'
The committee also recommended that the guidance should: be impartial as to providers and type of product; include an initial opportunity for face-to-face guidance; be a free service; be clear to the consumer what is being offered, the limitations of the guidance, and what protection it gives consumers in the event of detriment; and be co-ordinated with government-sponsored guidance relating to long-term care.
Elsewhere, the report argued that the greater flexibility and choice offered to those approaching retirement would lead to financial innovation.
Tyrie said: 'Innovation needs to provide products that are in the interest of consumers and which are sold responsibly.'
He added that the Financial Conduct Authority, with its new powers of intervention, would be under the spotlight.
Commenting on the report, Malcolm McLean, senior consultant at Barnett Waddingham, said the committee's suggestions on the guidance guarantee were 'sensible' but warned that getting the new system up and running would be challenge.
At MGM Advantage, pensions technical director Andrew Tully observed that previous efforts to increase the number of people shopping around for financial products for their retirement had not been successful.
'We have the chance to build a system that really helps customers make the best decisions around their retirement income, but it needs to be independent so there can be no accusations of vested interests taking priority,' he said.
'While guidance is helpful, many others may need full regulated advice. So there needs to be a clear hand-off from the guidance service to financial advisers.'