Ministers will today unveil plans for a pilot scheme to provide free financial advice to British consumers. The move comes in response to a report commissioned by the Treasury from Otto Thoresen, the insurance boss.

In his report, also published today, Mr Thoresen calls for a free nationwide financial advice service, amid growing concern about levels of consumer debt in Britain. Yvette Cooper, Chief Secretary to the Treasury, will announce plans to back a £12 million regional pilot scheme likely to last at least a year, in tandem with the Financial Services Authority, the chief City regulator.

As well as regional drop-in advice centres for those in need of help with financial matters, the so-called “pathfinder” scheme will involve a telephone service and probably a website.

It will draw on existing services such as Citizens Advice Bureaux and The Pensions Advisory Service, already funded by the Department for Work and Pensions. If the pilots prove successful, the Treasury is likely to back a nationwide rollout of a financial advice service, targeted at the 7.5 million people seen as the most vulnerable in society but freely available to all.

Ms Cooper will say: “Whether it is working out credit card repayments, budgeting for a new baby or planning for retirement, people have to make serious financial decisions at every stage of their lives.

“Getting some free, independent and trusted guidance can make all the difference and can help families to manage their budget and get a better return on their savings. It could also help prevent people getting ripped off by loan sharks or caught out by the small print.”

Mr Thoresen, the UK chief executive of Aegon, the Dutch-owned insurer, will recommend that the Government and financial services industry split the £50 million to £60 million a year cost of introducing nationwide financial advice. Mr Thoresen was asked to work on the review 14 months ago by Ed Balls, who was then Economic Secretary to the Treasury.

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