There is a simple solution worth trying to the persistent problem of people wasting billions of pension savings each year at retirement.
Experts I have consulted across insurers, consultants, IFAs, trustees, educational bodies and charities helping older people all think it is a great idea and worth a try.
The solution has two legs.
1. A mandatory one page letter to be sent to the consumer just before retirement.
It gives people the straight facts and will stimulate action and also enable action.
You have £[40,000] of retirement savings that you need to decide how to turn into an income. You have one chance to make a good decision as you cannot normally change your mind later on.
The difference between a good decision and a bad decision is typically worth £[8,000] (it could be more or less depending on your personal situation).
In the enclosed pack you will find all the information you need to make a decision.
We understand that this decision is difficult and complicated. The Regulator recommends that you seek independent financial advice should you need any help.
You will find an adviser who specialises in helping people like you on retirement at: [www etc] or by calling [0800 xxxxxx.]
All the advisers have agreed to a Code of Conduct which includes the guarantee that you will not have to pay anything to them unless they can make you better off.
Please take the time to make the right decision for you.
Your pension company.
2. An accredited pool of experts, regulated by the FSA, willing to help people make a sensible decision.
There is no compulsion to use this pool of people, just an easy opportunity for those who want to. All the evidence points to people needing expert help and finding it very hard to access it.
To provide additional consumer protection, all advisers will be accredited by the Society of Later Life Advisers (SOLLA). SOLLA have a fantastic track record in setting standards for advising elderly people. It is not mandatory to be a SOLLA member but such is the value of the accreditation that Local Authorities will only refer people seeking advice on Care Funding to a SOLLA member.
All advisers will have to satisfy minimum training, experience and CPD requirements. People accessing a SOLLA accredited adviser will benefit from the following code. The code strikes a balance between ensuring good outcomes for members whilst being practical to implement.
Good outcome Adviser commitmentResponsibility clear Be up front about whether the advice means the client takes ultimate responsibility for decision or whether the adviser does. Accessible Everyone advised no matter how small Client’s interest first Independent, whole of market review including checking the ceding scheme benefits’ small print Value for money guarantee Client never charged unless they are made better off. Fee agreed whether taken by commission/deduction from pension pot or met by client Clarity All advice to the client is in writing, written in Plain English avoiding jargon and clear as to the recommendation or information given. Best outcome achieved Member must be offered responsible advice where it is reasonable to believe that member may be making a poor choice. Responsible advice has to ensure the choice made is demonstrably suitable.
It is time for transparency and honest debate on this important area. The press reports that millions of old people will struggle to heat their homes this winter. There is no reason to delay solving the problem.
I look forward to hearing back from you. The people who support this action would be willing to meet with you to discuss it.