Advice or guidance? Which is it to be?

The Government made further announcements recently concerning pension changes that were announced in the Budget earlier this year. And I’m afraid these new pronouncements did nothing to dispel the nagging doubts that I have over the changes that have been introduced. It’s all well and good telling people that they can have the freedom to use their pension money in any way they like, whenever they like (within limits) but there needs to be a system in place to ensure that people who have invested their hard-earned cash in pensions over the years don’t then make the wrong decisions when it comes to taking that money out of their pensions. Decisions that could be expensive and leave them short of cash in later years.

So the Government has announced that ‘guidance’ will be available to people who need to decide what best to do with their pension fund. But ‘guidance’ is not the same as ‘advice’, and this point hasn’t really been made clear. The Money Advice Service and the various Citizens Advice Bureau dotted around the country may well be able to offer general guidance if people are looking for it but, according to the Financial Conduct Authority’s rules, only properly qualified financial advisers can offer regulated ‘advice’.

The difference between the two is really important and needs to be understood by anyone approaching retirement and wondering how best to take an income from their pension fund. Guidance will help people understand options at retirement in relation to the choices available and the tax implications of each of these choices as well as information about the value of their pension funds and any guarantees included in these funds.

What the guidance won’t do it tell you which option is better for you, which product (if any) you should buy, and who you should buy it from. For that you will need to take advice, and that advice is unlikely to be free, nor should it be since you will be getting it from a highly qualified individual who needs to be paid for his or her time. .

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