Failure to establish the cost of generic financial advice has endangered the Government's personal a...
Failure to establish the cost of generic financial advice has endangered the Government's personal account system, the Work and Pensions Committee has claimed.
If either the costs or quality targets for this advice cannot be achieved, the performance of, and trust in, accounts could be seriously undermined, the committee said.
In light of high costs quoted for a national advice system, the body is urging the Government to set out its own estimates as soon as possible, in absolute terms and as a percentage of funds held in personal accounts.
This criticism forms part of the Work and Pensions Committee's report on personal accounts, published last week.
On the question of an employer's role in the generic advice process, the committee said the workplace will be the first port of call for information, even if that is limited to giving out leaflets or phone numbers.
With this in mind, it believes this role should be anticipated and prepared for, both by employers and the Government.
Elsewhere, the cross-party group of MPs said the Government should clarify the target market for accounts and must not positively encourage those with existing access to a good workplace pension to participate.
Aegon's head of pension development Rachel Vahey said the concern is existing savers will redirect money into personal accounts while non-savers will simply opt out.
Meanwhile, the committee also called for caution when setting the level of fund choice available through accounts. While the Government rejected the multi-provider model for the account, there is scope for some kind of branding in the so-called third tier of fund choice.
In addition to default offerings and low-charge products, the proposals also mention making a wider range of vehicles available, including branded funds.
"The task is to balance the need for simplicity for the majority with choice for the minority," the Commission said.
"In our view, there is a case for choice to be limited to alternative asset classes and social, ethical and environmentally responsible funds.
"We see less of a case for branded funds in the safe haven of personal accounts, with their higher marketing and advice costs and associated risk of mis-selling."