Death knell for Personal Accounts?
I’ve just been reading the Thoresen Review of generic financial advice; it was published yesterday.
If you remember the review was set up in January 2007 to look at the idea of delivering a national approach to generic financial advice. In those headier times Government ministers were saying that the provision of generic advice would be key to the success of the national scheme of personal accounts that is to be launched in 2012.
Well, that mood seems to have changed a bit now that the Thoresen Review has finally been produced. Reality has kicked in. It’s not now ‘advice’ that will be delivered after all, but ‘money guidance’. No one, of course, will be, or should be, surprised by that.
The proposal is that the guidance provided will be made available to all through the internet, the telephone and even face-to- face. Mind you, given that it is estimated that the cost of providing money guidance will be as a low as £49 million a year (less than £2 a year for each person in the workforce1) it seems highly likely to me that the face-to-face-interface will be limited.
But that doesn’t matter. What does is that the report says that one of the principles on which this new national service will be based is that it will be:
“on my side”: impartial from the Government and the financial services industry.
I like the sound of that.
If the national scheme of financial guidance that is proposed in this report really does provide impartial information then it can hardly toe the government line on means-testing. How can impartial and “on my side” information neglect to point out that people auto-enrolled into pension saving can stand to lose 40% (or more) of the value of such savings if they are one of the 4 in 10 people at work today2 who are expected to be in receipt of means-tested handouts when retired? Not only that, but “on my side” guidance must surely make it clear to people that nobody will ever be able to tell any individual in advance whether they will be one of the 4 in 10 who will be in the frame to suffer such a catastrophic loss of value to their savings.
“On my side” generic guidance will not be key to the success of personal accounts; rather, if it does what is says on the tin, it will surely ring the death knell for the whole proposal.
4 March 2008
If you want to read the Thoresen Review by the way you can get a downloadable copy by clicking the link.
1. National Statistics - Labour Market Statistics, February 2008
2. DWP "Security in retirement: towards a new pension system" 25 May 2006.
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