MSE News: Confused by pension options? Free, impartial advice is coming in 2015

dunstonh

During his Budget speech last month, Osborne told the House of Commons everyone in defined contribution pension schemes would be offered “free, impartial, face to face advice” on their retirement options.

So that means impersonal "guidance" with an on-line flow-chart?

The Chancellor said a few things that were not actually that accurate in his speech. At the time, he said advice but it appears he did not realise that advice has a specific meaning in financial services provision. It has been watered down to guidance and whilst you may not actually see a flow chart, the person delivering the guidance will not be qualified to give advice and will in effect be using a flow chart method at their end.

Seems a waste of time if all the "guidance" is going to be is " find a (paid) IFA"!

There must be a lot of people in the same position as Pincher (and myself) with relatively small 2ndry pots who are looking for the best outcome.

The guidance will discuss the options to help narrow it down. It will not tell you which shop to purchase your products from. The person can then buy the product via DIY or if they dont know what to buy, they will be directed to an IFA or a restricted but whole of market adviser.

We dont know the scripts they are going to use. However, if it was a vehicle, it could be along the lines of this...
I need a vehicle.
What do you want from your vehicle?
I want to local journeys for everyday tasks, such as going to the shops. (eliminate helicopter)
is it just for you or will you need passengers?
I need it for my family of 4. (eliminate motorbike)
It sounds like you need a car.
What car do I buy?
I cannot tell you that but it is something you research for yourself or you can use an adviser and we have a list of advisers on our website....

PensionTech

Pincher, I'm afraid your cruise plan can't work.

The fatal mistake you've made is here:

but you still have to pay tax on the remaining 75% when you take it out, unless you buy an annuity

HMRC don't allow annuities to be paid tax-free. Annuities are income and are taxed as such - at your marginal rate. Much in the same way that lump sums (other than the 25% paid tax free) will be taxed after April 2015. So it doesn't matter if you consider Cunard a retirement product or not!

bmm78

brewerdave wrote: »

Seems a waste of time if all the "guidance" is going to be is " find a (paid) IFA"!

There must be a lot of people in the same position as Pincher (and myself) with relatively small 2ndry pots who are looking for the best outcome.

It should also include signposts to other sources of information for people who want to DIY. I'm not sure exactly how that is going to work, as they are unable to signpost to specific products/providers.

To be honest though, given the framework set by the FCA and the regulatory restrictions of a "guidance" session, it's only likely to be of significant benefit to those with a very basic understanding and also basic needs.

System

dunstonh wrote: »

The Chancellor said a few things that were not actually that accurate in his speech. At the time, he said advice but it appears he did not realise that advice has a specific meaning in financial services provision. It has been watered down to guidance

He said the advice will be delivered by the Money Advice Service (MAS).
Their website says they offer independent pensions advice - no mention of guidance only.

bmm78

Clifford_Pope wrote: »

He said the advice will be delivered by the Money Advice Service (MAS).
Their website says they offer independent pensions advice - no mention of guidance only.

Which is where a lot of the confusion comes from. In everyday language, "advice" is a perfectly reasonable representation of the service they are supposed to provide.

In a FCA regulatory sense on the other hand, describing their service as advice is fundamentally incorrect.

The guarantee offered by MAS, TPAS and everyone else will be classed as "guidance" in FCA terms. - this has been formally clarified many times and there is no dispute about this. Outside of regulated financial services, I guess people can call it whatever they like.

bmm78

http://www.fca.org.uk/static/documents/consultation-papers/cp14-11.pdf

A link to the FCA consultation paper on the guidance guarantee.

Of particular interest is page 17, which provides a breakdown of what the service is intended to do.

Moby

http://www.theguardian.com/money/blog/2014/jul/21/osborne-pension-reforms-benefit-richest

bmm78

Moby wrote: »

http://www.theguardian.com/money/blog/2014/jul/21/osborne-pension-reforms-benefit-richest

I think the writer of that article has completely missed the point about what the guidance guarantee is, and where it is intended to fit into the consumer journey. He seems to be confusing the face to face element of the guidance guarantee with regulated advice (he obviously isn't alone in that).

There's plenty of areas in the proposals that can be criticised, but it should really be done from a position of understanding.

dunstonh

Clifford_Pope wrote: »

He said the advice will be delivered by the Money Advice Service (MAS).
Their website says they offer independent pensions advice - no mention of guidance only.

The Money Advice service has flaunted the word advice frequently. It just adds to the confusion. However, if you read most official documentation now, it refers to guidance.

Pincher

PensionTech wrote: »

Pincher, I'm afraid your cruise plan can't work.

The fatal mistake you've made is here:



HMRC don't allow annuities to be paid tax-free. Annuities are income and are taxed as such - at your marginal rate. Much in the same way that lump sums (other than the 25% paid tax free) will be taxed after April 2015. So it doesn't matter if you consider Cunard a retirement product or not!

With an annuity, you get paid an income, which is easy to tax.
How do you tax an inside cabin on the Queen Mary, or three meals a day in the Restaurant. Benefit in Kind?

Apart from reducing the state's care burden, it stimulates the care industry and generates more employment, which in turn generates tax income. Economists are always talking about the grey pound, this is a proposal that utilises it to good effect.

Tax breaks always start out with good intentions like encouraging the British film industry, but somebody will come along and exploit it. I know it's not allowed right now, but if somebody mentions it to Ed Milliband, he could easily champion it as a no cost way out for the care for the elderly crisis.

20% income tax on £36k is £7,200. Reform the tax system just so I can get a cheaper holiday, I should get a medal from MSE.