Employers still fear the UK’s ‘tight’ definition of financial advice which means many people are still prevented from getting financial help or advice, the deputy director of the Pensions Policy Institute has said.
Speaking at FTAdviser’s Afterlife Summit yesterday (May 19), Sarah Luheshi said employers were still reluctant to contact employees about their finances for fear of getting in trouble for giving advice .
“The biggest problem is a fairly strict definition of what advice is. This actually prevents a number of people from getting help accessing help and advice, through their employer or other sources.
“Because there is a great fear of breaking the rules and being held accountable,” Luheshi said.
“I’ve heard horror stories of employers saying ‘we don’t think we can approach our staff and say ‘have you thought about increasing your pension contributions?’ because they think they might be tarred at giving advice and get in trouble for it.
“We need to make it possible for all people to feel like they can access needed help, advice or guidance, whatever.”
For years, employers have been accused of “hiding their heads in the sand” on various financial issues affecting their workers.
But over the years, research has suggested that some bosses are increasingly able to offer their employees increased financial support. In 2018, a study by Aegon found that 60% of companies with an employer retirement engagement strategy provide their workers with access to a financial advisor.
Regulatory interpretations must be worked on
SimplyBiz’s Head of Strategic Development, Richard Merrett, was also on the panel. He said that while regulation was a good thing and had improved his market in particular – the mortgage market – by making it more professional, there are limits and these are often “around interpretation”. .
Merrett agreed with Luheshi, saying, “After the past two years, more people need help than ever before. The pandemic has been a cash flow crisis for everyone – retailers, mortgage lenders, consumers… It’s access to cash that has made businesses live and die.”
“If you look at the interpretation of the regulations on this, with the release of shares for example, there is an interpretation of the regulations that there is a restriction on what you can extract and put in savings cash.”
Merrett said the industry needs to be faster and more nimble in what is allowed by products and regulations to meet consumer needs.
A major network, Merrett said without identifying him, imposes a £10,000 cap on the amount of money an adviser can extract through an equity release plan or product.
He questioned that, adding, “With the rising cost of living, that might not be enough to meet people’s needs. It is really important that we continue to move this file forward.