Press release

LV= urges government to abandon paid-for guidance suggestion

  • Paying for guidance at retirement could create significant consumer detriment and lower numbers taking advice
  • LV= estimates each year consumers purchasing an annuity could lose out on nearly £47 million, or £1 billion over their retirements, by not taking advice
  • Mutual insurer warns there is also a very real risk of future mis-selling scandal due to lack of consumer protection

In its response to the Government consultation, ‘Amending the definition of financial advice’, LV= warns that creating a market where firms charge for guidance at retirement could lower the take up of regulated advice and create significant consumer detriment that potentially leads to another mis-selling scandal.

While LV= strongly supports the decision to create a single definition for regulated advice, it believes the consultation’s suggestion that more firms will offer paid-for guidance as a suitable alternative to advice would lower the perceived value of regulated advice and make people even less likely to take it.

If the number of people taking advice doesn’t increase, there could be significant financial implications for retirees. To illustrate this, LV= looked at the potential effect on those customers choosing to purchase an annuity. The insurer estimates that, each year, consumers buying annuities could lose out on nearly £47 million in extra retirement income by not taking advice. For one year’s retirees, this equates to £940 million lost over 20 years[1].

Firms could theoretically charge for guidance under current regulations, but this is an extremely rare practice. By the Government suggesting the number of firms offering paid-for guidance would increase, this legitimises the practice and adds another layer of complexity for consumers. Previous LV= research found people are already confused about the various types of advice available[2], and nearly a quarter (22%) of over 55s wouldn’t take advice because they think free guidance is sufficient[3]. If people are charged for guidance they may not understand how it differs from advice, and would unlikely be willing to pay for both, so this percentage could further increase.

There is also a very real risk that paid-for guidance could lead to a mis-selling scandal, owing to the lack of consumer protections. Consumers could find themselves paying for unregulated retirement guidance that offers no recommendation for a specific product and no route to redress if that guidance is misleading, incorrect, or leads them into purchasing inappropriate products. Unscrupulous firms may also take this opportunity to create low quality guidance that ultimately draws consumers into using their products, resulting in poor outcomes with inadequate consumer protections.

The Government has not provided any consumer research to support this proposal and show how it could improve outcomes for retirees. LV= has warned Government that firms charging for guidance would undermine the aims of the Financial Advice Market Review (FAMR) and risk damaging consumer confidence. It is therefore urging the Government to not allow any firms, regulated or unregulated, to charge for guidance.

Instead LV= would like Government to focus on ensuring all future reforms are made in the spirit FAMR intended and have the highest possible consumer protections in place. To end the confusion, LV= also wants the term ‘guidance’ to only refer to Government-backed pensions guidance – with all other organisations who provide ‘guidance’ referring to it as ‘information’ – and there to be simple, clear definitions for ‘information’, ‘guidance’ and ‘regulated advice’.

Philip Brown, Head of Policy, LV= said: “We have grave concerns about firms charging for guidance at retirement. We believe this would only lead to more confusion and complexity for people, which could lower the numbers taking financial advice, and potentially lead to another mis-selling scandal.

“At a time when the Government and regulator openly acknowledge the need for everyone to be able to access affordable, regulated advice at retirement, we see no reason why the Government’s consultation refers to paid-for guidance, which clearly risks undermining the Financial Advice Market Review. We have not seen any evidence that shows how this reform could benefit consumers and strongly urge the Government to discourage firms from charging for guidance.”

Notes to Editors

The HM Treasury consultation “Amending the Definition of Financial Advice” can be viewed here:


[1] According to ONS 2012 data, 600,000 people retire in the UK each year. ABI data shows that in Q4 2015 51% of retirement income products purchased were annuities (21,200 annuities compared to 19,700 drawdown products). 51% of 600,000 is 306,000. 80% of people shopping around for an annuity could have got a better deal (source FCA – February 2014). 80% of 306,000 people who buy an annuity equates to 244,800 a year. The difference between the best and worst annuity quote for a healthy 60 year old is £192 (analysis of MAS annuity tables November 2016). 244,800 x £192 equals £47 million a year. £47 million x 20 years (assumed life expectancy after retirement) equals £940 million over 20 years for one year’s worth of retirees.

[2] BDifferent carried out focus group consumer research in November 2015 aged over 55 but not yet retired to understand consumer views around financial advice.

[3] Consumer research among 1,033 UK adults aged 55+ conducted online by Opinium from 4th to 8th December 2015

About LV=

LV= employs over 6,000 people and serves over 5.8 million customers with a range of financial products. We are the UK's largest friendly society and a leading financial mutual.

When we started in 1843 our goal was to give financial security to more than just a privileged few and for many decades we were most commonly associated with providing a method of saving to people of modest means. Today we follow a similar purpose, helping people to protect and provide for the things they love, although on a much larger scale and through a wide range of financial services including insurance, investment and retirement products.

We are currently the UK's number one brand for Insurance and Investments, according to the 2015 YouGov Brand Index Buzz Rankings.

We offer our services direct to consumers, as well as through IFAs and brokers, and through strategic partnerships with organisations such as ASDA, Nationwide Building Society and a range of trade unions.

Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. LVFS is a member of the ABI, the AFM and ILAG. Registered address: County Gates, Bournemouth BH1 2NF.

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