Government intentions to design a national financial education service could impact on workplace schemes.
Plans by the government for a national financial education service could help employees understand their pensions and plan for retirement.
A team, led by Otto Thoreson, chief executive officer of Aegon UK, has been charged with researching and designing the national ‘generic financial advice service’ to help all of the population access financial education.
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The form this service will take has yet to be decided, and a government action plan is due to be published by the end of the year, setting out how measures to improve financial capability will be integrated into existing services.
Websites, telephone helplines and advisory centres are just some of the methods through which information might be made available. And with many employees likely to access the advice to help them make decisions around perks such as pensions, this could have an impact on the existing services from independent financial advisers (IFAs), which bosses can make available through work. The potential to provide free financial education through worksite marketing is already diminishing as demonstrated by HBOS’ withdrawal from this market last month.
But Angus Jones, managing director of Clarity, warned that if the helpline channels enquiries through to IFAs problems could emerge. “My worry is that the government helpline will become a lead-generator for unscrupulous sales [people]. I think the independent adviser title should only be attributed to someone who is fee based”.
However, he believed that the government would not want to risk damaging the existing financial services industry.
“The government isn’t going to want to disrupt, or compete with, the commercial businesses that already give financial advice. This would have a dramatic impact on existing insurance brokers and IFAs, and would result in huge bad feeling. Also, the Financial Services Authority regulatory issues involved in the government helpline giving advice would be immense. How would it go down politically if the government were ever accused of mis-selling? We imagine this is not a viable route for this reason alone,” he said.
Some in the industry also believe that the proposed national advice service won’t be able to compete with the tailored advice which can be made available to staff through the workplace.
Jonathan Watts-Lay, director of JP Morgan Invest, said: “The only way we’ve been able to get people to take note is through education that’s tailored to schemes in individual businesses. People will not go to the web because even in a large company where there is a fantastic web education on offer, the take-up rates are low.”
However, Harper Wright, financial education service manager at MBNA, said that any measures which help people understand their finances better would be a positive step.