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Pension reforms- the difference between guidance and advice


Are you clued up on the pension reforms, which are coming into place this April?

No? Well, to help with these new pension changes, the Treasury has created a brand new guidance service called Pension Wise. This service is a free and impartial government service that aims to help people understand the new pension options.

In the past, if you wanted to talk to someone about your pension options, you would have had to contact a financial adviser and they would have taken you through all the different options available to you.

When the new changes come into place, you will be faced with more pension options than ever, even if you have a small pension pot. With the new Pension Wise service, the Treasury has claimed that it will differ from information given to you from a financial adviser, but the actual differences between the two still isn’t very clear.

So what is the difference between ‘Guidance’ and ‘Advice’?
In the financial industry, there are large and important differences between the definitions of “guidance” and “advice”.

• “Guidance” is used to help the customer understand

• “Advice” is an in depth look at a persons personal and financial circumstances, goals and aspirations followed by the recommendation of specific products, services, or a course of action.

With so many changes happening at the moment and financial advisers being told that they can not compare themselves to the Pension Wise website, we ask, what is the difference between the Pension Wise guidance service and advice given from financial advisers?

Pensions Guidance

The new pension freedoms are part of the biggest pensions overhaul seen in over a decade. If you are reaching retirement age you will soon have more options than ever to choose from when accessing your pension, so therefore it is extremely important that you are aware of all possible options open to you and how these important changes might affect you.
To help you with the new pension changes the Government has launched the Pension Wise guidance service. This is a brand new partnership between the government and the Citizens Advice Bureau (CAB). This unique pension focused service offers face to face guidance from an “impartial guidance specialist”, with the aim of providing essential information on how you can now utilize your pension pot in a positive way. The government has advised that all staff providing the guidance will be “highly trained”.

Pension Financial Advice

Alternatively you can still go and see a financial adviser and receive guidance and advice in relation to your pension. A financial adviser can offer you the chance to discuss and review a range of specific products and services that they think could be suitable and benefit you.

Should you go for guidance or advice?

The regulating body for financial advisers, the Pension Wise service and the Financial Conduct Authority (FCA), have claimed that it would be incorrect to call the two services that are on offer the same.

We think this is a handy way to remember it:
- Regulated financial advisers: can recommend specific products and pension providers, which they think will help their customer the most.

- The Pension Wise guidance service: can not recommend services or providers and can only offer an outline of the options available to savers.

The Pensions Wise guidance service will not be regulated in the same way as financial advisers but it will still have to comply with FCA regulations, which have been created to ensure the service is impartial and the people providing the guidance fully understand what they are talking about.
It is therefore illegal for financial advisers to claim that they are giving you any advice as part of the Pension Wise Guidance service scheme. If they are found guilty of providing pensions guidance, while claiming to be part of the Pension Wise scheme without permission, they could face up to 51 weeks in jail.

Pension Wise, it seems, will be offering all retirees guidance on what options are available to them in regards to their pension now. It will explain products available and the benefits of them, but will not recommend or decide on a specific product for the consumers.
Financial advisers can still provide advice but can not suggest that a client does not need the guidance offered by Pension Wise. If you are looking for guidance on what the best option might be for you, speaking to Pension Wise. If you are looking for a decision more specifically tailored to you, it may be best to seek financial advice.

Need financial Advice?

If you have any personal finance questions related to this blog, then please contact our financial advisers. You can get in touch by asking a question online, calling us on 0800 092 1245, or by arranging a visit.

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