Pension Guidance With No Experience

Pension Guidance With No Experience.

Well, we think we have seen it all now on the Government’s new Pension Guidance Guarantee for the up and coming changes to flexible pensions starting in April 2015.

As part of its budget proposals last year, in which the Government introduced Pension Drawdown Flexibility for all, it also made a promise of free guidance.

This is not FREE guidance. The costs of offering pension guidance have been estimated by the Treasury for 2015/16 at £35m. This is will be in part funded by the financial services industry, with financial advisers being required to pay a levy of around 12% of the bill at £4.2m (which was halved from originally 25%) and much of the balance covered by other financial companies such as banks, insurance companies, pension companies and investment houses.

Who will offer “pension guidance”?

Neither financial advisers (the logical choice) nor banks or insurance companies have been selected to offer the back ground pension guidance to consumers. Organisations such as The Pensions Advisory Service (TPAS - a government pension service) and the Citizen’s Advice Bureau have. The issue here is do the people that are recruited for the roles have the necessary pensions experience?

We saw a report this week where Professional Adviser (an industry online and offline publication), had completed investigations into job vacancies at both TPAS and the CAB. An extract from a TPAS job vacancy suggested that candidates needed pension experience and “ideally be working towards an industry qualification”. A CAB vacancy suggests: “some pensions knowledge would be an advantage”.

Are we missing something? Should you be cautious? The answer is a resounding “yes”.

Most financial advisers offer a free initial consultation for say 30 minutes. In that time, you can have all your options explained to you and be in a position to make the biggest financial decision you make that affects the rest of your life. Make no mistake, your retirement options decision is one of the biggest decisions you will make and the wrong decision can have serious consequences throughout the rest of your life. Would you allow a “gas man” with no Corgi certificate to fit your gas fire or mend your boiler? No, it is against the law. Yet, people without certificates may be guiding you on your retirement choices.

The guidance guarantee, without highly qualified advisers, is a disaster waiting to happen. Will people run out of pension funds if they use drawdown exclusively? Some will. Some people that perhaps should have gone for a lower risk, annuity will not. Why a simple “Pension Aid” scheme, like the Legal Aid scheme could not be established for financial services where with the combined budget of the, in our opinion and the Treasury’s, failed government sponsored Money Advice Service (budget c £350m) and the Pension Guidance Guarantee (budget c £35m) could not have been used to offer 7.7m free £50 half an hour consultations per year via highly qualified financial advisers, we will never know.

A Cynical View

Pension Guidance is designed to fail. It is clear, the Government do not want the public to access quality advice. Meaning many will be tempted by pension drawdown, meaning more pension money withdrawn early meaning more tax revenue for HMRC. We predict, once the revenue has been collected to balance current and any future government’s books, the pension flexibility rules will be changed and pensions will not be as flexible as they are due to be in April 2015.

Be careful with your retirement choices and pension guidance and talk to a qualified financial adviser such as ourselves.