Who should provide the guidance?
Good guidance is already provided by specialist IFAs (in the context of incentive exercises) and by some non-commercial organisations. I believe that any organisation who meets minimum standards of qualified guiders and delivery processes could provide guidance on behalf of schemes and providers in an outsourced capacity. I believe there is a role for the commercial sector where there is scale and capacity, at the right level of skill.
As mentioned above, pension scheme administrators, in-house or third party, provide an obvious impartial source. I favour a default, low-cost service provided by the non-commercial sector, with an option for those schemes and providers who wish to select an alternative commercial model for their members to do so. It is important that schemes and providers, who will be required to offer and pay for the guidance, are able to select a partner to deliver the guidance, as this helps ensure quality delivery.
Selection by schemes and providers will also maintain a competitive tension to ensure that pricing remains keen and quality and innovation remain high. Leaving choice to schemes and providers is more likely to lead to expansion of guidance beyond the point of retirement and beyond DC. It would also encourage schemes that already provide expensive pre-retirement counselling to continue to do so.
Monitoring of guidance quality is necessary, but how you undertake it can make a difference. Guidance is not Advice; there is no need for a contract between the guider and the member. Guidance makes no recommendations. Instead, it is collecting relevant information, discussing options and reflecting member preferences in a conversation. The conversation may be recorded and may be summarised and shared back with the member, but it remains a conversation.
A system of independent accreditation of organisations, commercial or non-commercial, who deliver guidance could be put in place through spot checking of processes, guider credentials and guider performance by experts who understand guidance. Non-commercial guidance organisations would be well-placed to provide this oversight, as would the Pensions Regulator. FCA would be credible, but could inadvertently blur the important distinction between advice and guidance. This could result in fewer organisations willing to deliver guidance. This is happening already. Commercial firms like auditors could also undertake the independent assessment, but would cost more.
April 2015 is not far away. Whatever solution is preferred, it must be ready, even if in a cut down version initially, with aspiration to develop. Some administrators and others could be ready to provide the guidance on time, but perhaps permitting a period of time to meet all the quality standards (interim accreditation could be awarded for example where an organisation shows sufficient progress toward full guidance accreditation and has documented plans in place to complete the journey) would help get us where we need to be.