A woeful attempt at a pun, sorry. I reckon most people reading this blog will have read both the Treasury and FCA paper around guidance, tax changes and DB to DC transfers. If not you should, after all you will be funding about a 1/3rd of it. A blog for another day.
Instead I’ll focus on what it will do, not who pays for it. Providers have been required to “signpost” many things over the years, OMO and TPAS specifically in wake up letters. Why signposting Guaranteed Guidance will improve outcomes and drive more people to take it – I just don’t get it?
There needs to be a stronger intervention here. We will get a revamped, probably rebranded TPAS and MAS. I’m sure the service will be valueable and good. I’m not not sure enough people will get it. Providers don’t need to check if you’ve had it, don’t need to check if you act consistently with it. Just warn you about tax implications if you take it, why just tax implications?
It’s a step forward, probably, but it feels like a missed opportunity. It doesn’t feel like it will have the impact. Those with less than 30k most likely will take cash, then maybe quite quickly state benefits stopping as they now have cash. Appreciate guidance guarantee would cover that, but most won’t seek it. They will read the headlines and take the cash.
Those that don’t probably will do little to shop around. Most will simply keep cash with existing provider and drawdown from there. Might be right thing, might not, but they won’t recognise the value in switching, when the accessibility applies to all. Equally you might see some schemes not opting to take the statutory override and force people out of schemes, perhaps losing benefits or paying high exit charges. It is complex, and the signposting won’t do enough to drive people Guidance.
The big game changer for me is the tax treatment of annuities. On the whole I think it’s a good thing, I think it might lead to innovation. It might also lead to different ways to make more cash, in itself not a bad thing, so long as it’s clear. A watching brief, for sure, but the cost of 10 year guarantees today are pretty minimal, no-one takes them. Lets see if the cost goes up in proportion to the marketing spend on promoting the new found freedoms. It’s another great opportunity, lets not blow it!
I hope we can make the new GG a meaningful success, it’s important the initial ideals are kept and people actually access it. I think the accessing will remain the biggest problem.
As for advisers having to pay, whilst I said it was a blog for another day, I can’t quite believe that is the right outcome. I’ve no idea what percentage of MAS or TPAS current customers seek (and actually receive) financial advice after speaking to them. It’s an open question, geniuely no idea, but if the figure is high you could argue some of the logic, if its not well, its hard to see any logic really.