Mark Hoban MP – Financial Secretary to the Treasury
Steve Webb MP – Minister for Pensions, DWP
Lord Adair Turner – FSA

29th February 2012

Urgent call for a ‘retirement income summit’ to protect poorest and least well pensioners

We believe there is a significant risk that the impending regulatory environment for financial advice (RDR) may result in an ‘advice gap’ where the poorest and least well pensioners will fail to receive much needed financial advice. In turn they run the risk of having less income in retirement. With one in six pensioners already living in poverty, these people need more income in retirement – not less!
We request that you urgently convene a “retirement incomes summit” to address this issue, alongside other issues with the annuity market that are leading to poor outcomes in retirement for those with defined contribution pensions.

As you are aware 80% of pension pots are valued at £40,000 or less. Yet currently only one in three people shop around for the best retirement income – even though the difference between the best and worst income rates can be up to 40% or more for people with a health or lifestyle condition. Research shows that financial advisers can be critical in this process. Yet many may leave the market or will stop advising on unprofitable small pension fund business as the result of these new regulations.

We also believe that the move from final salary pensions, which guaranteed an income in retirement for life, to new pension structures, mean that far more people will be reaching retirement with a small pension fund who will have to make choices about their retirement income options without advice.

We must address core issues before the introduction of the RDR in the New Year – or risk an ‘advice apartheid’ between the wealthiest and poorest pensioners.

We accept there is major role for industry and the consumer and financial advice sector. But we urge Government to take a leadership role.

The “retirement incomes summit”, must address how we can:

  • ensure that an advice gap does not impact negatively on the ability of the poorest, and people in poor health, to maximise their retirement income?
  • simplify the process for those who choose to shop around
  • clarify the distinction between the provision of information and advice, and the extent to which providers are able to advise potential or existing customers without falling under the RDR regulatory regime and charging structure?
  • ensure that the quantity of financial advice – as well as quality – moves to the heart of the RDR process?
  • join up public policy agendas on financial advice, consumer engagement, and enabling saving?

The summit should also address how we can drive better outcomes at retirement by addressing wider issues around the functioning of the annuities market and the appropriate support for members of defined contribution schemes when turning their pension pot into an income.

We support the principles underpinning RDR. We also believe that the required outputs, which we have set out above, can be achieved without any changes to that regime.

However, if we cannot achieve those much needed changes to processes and communications ahead of RDR, there may be serious consumer detriment to our poorest and least well pensioners.

The International Longevity Centre – UK has today published a policy brief which explores these issues in more detail.

Yours sincerely

Dame Anne Begg MP (Chair, Work and Pensions Select Committee), Clive Bolton (At Retirement Director, Aviva), Jonathan Evans MP (Chair, All Party Parliamentary Group on Insurance and Financial Services), Frank Field MP, Baroness Sally Greengross (ILC-UK Chief Executive), Steve Groves (Chief Executive, Partnership), Chris Hannant (Policy Director AIFA), Michael Lake CBE (ILC-UK Chairman & Former Chief Executive of Help the Aged), Lord Lipsey (President, Society of Later Life Advisers), Ivan Martin (Chair, Sesame), Lord John McFall (former Chair, Workplace Retirement Income Commission), Paul McMillan (Editor Money Marketing), Tom McPhail (Hargreaves Lansdown and Pensions Income Choice Association), Lord Newby, (Co-Chair, Liberal Democrat Treasury Parliamentary Party Committee), Joanne Segars (Chief Executive National Association of Pension Funds), Elliot Varnell (Milliman), Keith Boughton (Director, Insurance and Payments, Xafinity Paymaster).


A response to the Open Letter above was received on 5th March 2012. To view the response, click here.


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