PENSIONS: Make it personal
Someone must be prepared to cover people's losses through generic advice
There is something called the Thoresen review going on at the moment and it is looking into how something called generic advice can be made available to people.
Generic advice is something that is seen as being key to the success or otherwise of the proposals to launch a national scheme of personal accounts in 2012 or thereabouts.
I have been thinking about this idea of personalised generic, as opposed to specific, advice for some time.
It seems to me that it is going to be highly important for the millions of people who will be swept into pension saving through the process of auto-enrolment that they will be able to rely on this generic advice.
Quite apart from anything else, it will be physically impossible to provide specific advice to so many people in such a short space of time through the limited number of qualified financial advisers in the UK.
These days, those involved in the provision of specific advice to individuals on pensions need to take account of every aspect of a client's financial affairs including, crucially, any future entitlement to means-tested benefits.
That is as it should be, of course, with the very real danger that some people who are advised to save could lose some or even all the value of their pension savings through the withdrawal of means-tested entitlements.
Simple generic advice, such as "save in a pension" for example, could never hope to be a safe enough process to apply to millions of auto- enrolled people who will clearly each have an important individual decision to make with regard to remaining in the personal accounts scheme or getting out of it. It would obviously not be in the best interests of all those being advised.
So the idea of personalised generic advice seems a better one to me but it raises some difficult questions in my mind. The big thing that occurs to me about the more specific forms of generic advice that will still fall short of specific financial advice is that people will obviously feel they can rely on it.
To be of real value to people, it seems to me that any such tailored generic advice would only be likely to work properly if someone, the Government maybe, is prepared to underwrite any financial losses that people might incur through relying on it.
That seems a much more sensible starting point, don't you think?
Any such quasi-advice system that is made available, but doesn't give that kind of guarantee to its users, should clearly have a disclaimer to that effect prominently displayed on each page.
Something along the lines of: "If you rely on the advice given and lose money because of it, tough" or something similar would do the trick.
That alone ought to be enough to tell prospective users all they would ever need to know about the value of the generic advice available to them.
First published in Money Marketing, 7 June 2007