Pensions expert Ros Altmann has today called for a National Wealth Service providing retirement guidance and advice to help people plan their financial future.
In a report entitled Flexibility in retirement, sponsored by life insurers MetLife, Altmann argues that the UK must 'revolutionise' the way it offers pension education and savings products to individuals if it wants the new retirement freedoms announcement in Chancellor George Osborne's March Budget to work.
From April 2015, there will be complete freedom to take as much money as desired from defined contribution pensions after age 55, subject to marginal tax rates. There will also be a new requirement for pension providers to make sure that everyone retiring with a DC pension fund receives 30 minutes of free face-to-face impartial guidance on the choices they face when deciding how to use their retirement savings.
'The free impartial National Retirement Guidance Network could be developed into a National Wealth Service which will focus people's minds on how crucial it is to save for retirement and to plan for their financial future,' said Altmann.
'This should be incorporated into all auto-enrolment pension schemes, rather than just than a one-off exercise. A one-off discussion is unlikely to be sufficient to plan a whole retirement and reassessing plans regularly over time is also important.
'It will be crucial for users to understand what the half-hour "guidance" system offers, who it is given by, what its limits are and what if any protections it offers.
'The guidance will need to be of a broader nature than would have been required under the traditional annuity/drawdown only regime as it will need to be much more comprehensive than just focussing on the risks or benefits of using one or two financial products.'
The report noted that the Pensions Management Institute and the Chartered Insurance Institute were considering devising a basic qualification to cover the necessary elements of pension scheme member guidance. It suggested that the Pensions Advisory Service and firms who already provide financial education in the workplace could also be involved to help establish this network.
But Altmann said that, given the short timescales for establishing this new system of at-retirement guidance, 'the national network would probably have to focus initially only on the "at retirement" decisions.'
She stated that the service could be expanded to form part of a much wider system of financial education, which would focus on all aspects of financial planning and retirement saving. These could include: accumulation of pensions, at-retirement options and decumulation, also incorporating the tax implications.
She added that the service would need to take long-term care into account and ideally would encompass all assets, including property wealth, other savings and managing debts.
Altmann was made a CBE in the recent round of Birthday Honours for her services to pensioners and pension provision.
