Speaking at a Treasury select committee (TSC) hearing on last month’s Budget, Hannant (pictured) said: “If everybody who is retiring next year were to seek financial advice then there would be a problem with capacity.”
He explained to Conservative MP Brooks Newmark “there would need to be a clear signal early on what is expected from the industry to prepare.”
But he added there was scope in the industry to deliver advice “more cost effectively”, for instance by using more junior staff to carry out the process overseen by advisers, or by developing more technology-based advice methods.
Hannant admitted the challenge for the sector was to become “more efficient” but said the ‘skills gap’ would be bridged more easily if the regulator lowered its regulatory costs allowing firms to re-invest in their businesses.
Asked whether Hannant thought the £20m put aside by George Osborne to fund his ‘right to advice’ scheme – a plan announced at Budget 2014 which guarantees free impartial guidance to all retirees at point of retirement – was enough, he replied “I would guess it would cost a bit more”.
But he added it was impossible to come up with a price without being given the dimensions of the ‘guidance’ that will be provided.
Advice for somebody who wants to purchase an annuity would typically centre around £680 or 2% of the pension pot, he said.
For full comprehensive advice it would be more expensive.
Earlier in the hearing, the Financial Conduct Authority (FCA) told the TSC it was “absolutely clear” that what the government had in mind with its ‘right to advice’ pledge was ‘guidance’, not regulated financial ‘advice’.
Hannant said it should be a combination. Those giving guidance should be skilled enough to be able to identify when a client needs advice and then refer them on to a qualified adviser, he said.
