The difference between guidance and regulated advice

Exciting times are imminent. The changes affecting the way in which over 55s access their pension benefits, announced in the 2014 Budget and Autumn Statement, are merely weeks away from implementation.

Details have finally emerged on the new Guidance Guarantee, which is costing a reported £35 million and will now be called Pension Wise. This is the government’s initiative to provide all pension savers with free and impartial guidance consultation, in order to assist them in making an informed decision on how best to use their pension savings.

Recent reports suggest that guidance alone may not be enough for many people to be able to make such an important decision though, after all, guidance is not advice, nor is it regulated.

Consultations will last approximately 45 minutes and will be provided by an over-the-phone discussion with a representative of The Pensions Advisory Service, or via a face-to-face meeting at one of the 44 selected Citizens Advice Bureau. Whichever method is chosen, the level of information that is required in a recorded format is quite extensive, so will it be sufficient to reach a definitive conclusion? This is yet to be evidenced, but it is a positive step nonetheless in increasing the knowledge and awareness of what is an already complicated area.

If you watched the Channel 4 Dispatches programme, which aired on Monday 12 January, these new pension freedoms could provide encouragement for some unscrupulous firms to set up scams. The programme itself illustrated some examples of some highly complex, risky and importantly, unregulated investment ‘opportunities’. This further raises concerns and emphasises the need for both guidance and advice.

Individuals who have undertaken a consultation will still be able to seek financial advice through a regulated financial advisory firm. Doing so means that the adviser will make a recommendation based upon your personal circumstances and after assessing your needs, requirements and objectives. You also have more rights and protections when using a financial adviser, due to the way that they are authorised and regulated. You don’t have this same level of protection through a guidance service as no advice is being provided or taken.

As a firm of independent financial advisers, we are experienced at dealing with retirement planning issues and are fully up to speed with the forthcoming changes. The increasing array of options at retirement, together with the potential tax implications that some options now create mean a greater need for financial advice due to the complexities involved.

Our usual process is to arrange an initial meeting for which we will not charge. This enables our Financial Planning Consultants to establish your needs and objectives and make an assessment of the work required, including any on-going work. We will explain what costs will be payable for our advice and services, but will not charge until we have agreed with you how much and how we are to be paid.

If you would like some advice in this complex area, please get in touch at any of our 15 office locations across the North of England and South of Scotland.

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