Congratulations on reaching retirement – we hope some of the most fulfilling and rewarding years of your life are ahead of you. If you’re thinking about taking advantage of the pension freedoms – the ability to take your pension pot how you want it from age 55 onwards – and need help deciding whether it’s right for you or not, then you’re in luck. The Government has said everyone is to be given help to make the best choices about how to use their new freedoms, under a scheme called the Guidance Guarantee.
What is the Guidance Guarantee?
The Guidance Guarantee is “a right to free and impartial guidance on how to make the most of the new pensions choices” according to the Government.
It will be rolled out under the Pensions Wise brand, which is set to launch later this year, and will be delivered over the phone and online by The Pensions Advisory Service, and in person at selected branches of the Citizens’ Advice Bureau. Other providers may offer guidance as part of the Guidance Guarantee, but be aware, guidance is not financial advice.
What’s the difference between advice and guidance?
There’s a big – and legally defined – difference between advice and guidance. When we talk about advice in a financial context, we mean ‘regulated financial advice’, which comes with a rulebook attached.
Financial advice means an independent qualified professional adviser will look at your personal circumstances, take your situation and means into account, look at what you want to achieve and then assess available options to come up with a written recommendation tailored for you.
Advisers are either ‘Independent’, which means they can look at the entire market and advise on a whole range of products and situations in an unbiased manner, or ‘Restricted’. Restricted advice means they specialise in certain areas and can offer recommendations from a specific range of products. For example, Skipton Financial Services Limited (SFS) – a wholly-owned subsidiary of Skipton Building Society - offers Restricted advice and provides access to over 3,000 collective investments from 70 providers.
Guidance, on the other hand, means you will be given general information about investment products, or have products or related terms explained to you.
The main difference between guidance and advice is that under guidance, there is no tailored recommendation – the decision about which product to buy or what to do with your money is up to you.
What’s to stop me doing the wrong thing?
At the end of the day, what you decide to do with your pension savings under the new freedoms is up to you, but there are measures in place to make sure people are made aware that their actions have consequences.
When you get in touch with your provider to access your pension, the UK financial watchdog, the FCA, has ordered that providers make sure you are aware of the consequences of your actions in as clear and direct a way as possible. They will ask questions about key aspects of your circumstances that relate to the choice you are making and give relevant risk warnings in response to your answers.
Providers must also make sure that you know about the different roles of Pension Wise or independent, regulated financial advice in making decisions around your pension, and describe the tax implications if you plan to take cash from your pension pot. For more about the tax implications of taking cash out of your pension, see our article, ‘How much tax do I pay on my pension?’.
What other help is available?
You’re looking at it! Retiresavvy does not offer or provide independent financial advice, but it has been created as the community where you can find out all you need to help demystify retirement. From frequently asked questions about pensions and retirement issues to articles on planning your retirement and funding your retirement, we hope the site will help answer your queries about and help you make connections with other like-minded individuals on a similar journey.
If you have any questions about pension, retirement or later life that you’d like to see answered, please drop us a line.
Will you be taking advantage of the pension freedoms? Do you think the Guidance Guarantee goes far enough? Let us know by commenting below.
This article has been commissioned by retiresavvy and any opinions voiced are the author's own.
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