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

iainwish

Caveat emptor! Let buyers beware!

Back in the 1990s the UK pension regulator known as the FSA printed up a booklet for anyone considering a pension transfer away from a company scheme also known as a defined benefit or final salary scheme.

This guide to pension transfers had to be issued by advisers to anyone thinking of such a transfer. In the booklet it categorically stated that final salary pension benefits were Guaranteed. Transpires that was rubbish and many lost all or most of their pension when their employer went bust.

The FSA didn't compensate and stated the booklet was 'guidance not advice'! What a joke! But if you lost your company pension it was not funny.

There is a lesson in life here. If the person giving pension advice is Authorised and Regulated by the FCA to do so and you are paying a fee then that is probably advice - if the advice is later proven to be duff then you can claim compensation as advisers will have professional indemnity insurance and belong to the FOS and FSCS schemes.

If you go down the DIY route using the internet and guidance you won't have any real protection as you are deemed to be self advising.

If you rely upon the Pensions Advisory Service (TPAS) and the Money Advice Service (MAS) then there is no advice - just guidance. You are the one making the decisions - whether these prove to be right or wrong - who knows? Fingers crossed unwise where you could be talking about your biggest asset.

Websites like Unbiased co uk will give you 6 independent advisers (IFAs) in your area and you can search for those with specialist pension qualifications.

Fewer than 2% of all UK financial services complaints in 2013 were against IFAs. The most complaints are against banks and bank financial advisers.Does that prove anything? Make your own judgements. IFAs can usually deal with every provider to get the best deal. Restricted advisers usually offer less choice (so danger is you don't get the best deal).

Chartered IFA firms need to follow a strict code of ethics. Things are improving out there advice wise for those with a good IFA. Net of fees you should be better off. Shop around.

WARNING - if your pension pot is under £75k/£100k then you may find some IFAs won't offer face to face advice - cost of giving regulated advice is high and IFAs don't wish to operate at a loss.

Commission from insurers to financial advisers on annuities is abolished so expect to pay a fee unless you go to a 'direct to consumer organisation' (no advice given) where the commission system (for some reason) still exists - so a fee may be avoided but you are again deemed to be self advising.

One adviser told me that it never takes less than 6 hours to sort all the paperwork and that is for a simple personal pension. Application forms, claims forms, discharge papers from ceding scheme, lifetime allowance forms, client identification, proof of age, lost policy forms, key features documents etc etc - the adviser does all that for you.

Some insurers like Windsor Life can take a year to pay your pension out so best to take advice around 6 months before you take the benefits. Good luck!

usignuolo

Why would the proposed levy to pay for free pensions advice for consumers, be needed if the advice is not going to be free. What would the levy be for?

RichandJ

usignuolo wrote: »

Why would the proposed levy to pay for free pensions advice for consumers, be needed if the advice is not going to be free. What would the levy be for?

To pay for the 'guidance' before an individual goes for proper regulated advice or not.

Another QUANGO basically.

dunstonh

usignuolo wrote: »

Why would the proposed levy to pay for free pensions advice for consumers, be needed if the advice is not going to be free. What would the levy be for?

The levy is for guidance provision. Not advice provision.

System

I think there are going to be a lot of disgruntled people around when they discover that what they will see as a pedantic distinction between advice and guidance means they don't actually get what Osborne appeared to be promising.

Have some wine, said the March Hare.
I don't see any, said Alice.
There isn't any, said the March Hare.

Reaper

I see the MSE article has now substituted the word "guidance" for "advice". It really needs a little more on the definition of the word though as its meaning is not clear to the general public.

Though to be fair I'm not sure those who came up with the policy are clear themselves exactly what it is yet.

bmm78

Clifford_Pope wrote: »

I think there are going to be a lot of disgruntled people around when they discover that what they will see as a pedantic distinction between advice and guidance means they don't actually get what Osborne appeared to be promising.

Have some wine, said the March Hare.
I don't see any, said Alice.
There isn't any, said the March Hare.

Depending on what people's expectations are going in, the guidance session could easily end up being a damp squib.

Considering that the decision is soon going to be further complicated by an influx of "innovative" new products onto the market, people could easily end up more confused at the end of it. The guidance will be limited to talking about the "key facts and implications" of the "broad categories of options".

The first broad category is "taking income via a formal retirement option". Bear in mind that this category covers not only conventional annuities and drawdown, but everything in between (Fixed-Term Annuities, Asset-Backed Annuities, Flexible Annuities plus J-Shaped / U-Shaped Annuities, Deferred Annuities and any other guff that will be on the market next April). A quick overview raises more questions than answers, but if any of these potentially suitable options are ignored could this give rise to complaints about not having been informed of all the choices available? ("The Money Advice Service didn't tell me I could buy a W-Shaped Annuity with lump sum care funding option....")

A good adviser is skilled at taking complex scenarios and choices and simplifying the options. They can quickly discount products that are completely unsuitable, and narrow down the alternatives based on a small number of key questions. It's highly questionable whether an unqualified MAS employee (for example) will have the knowledge, experience, empathy and communication skills to put clients at ease and in a more informed position.

(I'm not proposing that regulated advice for everyone is the answer - many do not need it, or either can not or will not pay for it)

People who rely on their own research should be fine, but those who are relying on the guidance session as a one-stop pension shop are likely to be very disappointed.

bmm78

Reaper wrote: »

I see the MSE article has now substituted the word "guidance" for "advice". It really needs a little more on the definition of the word though as its meaning is not clear to the general public.

Though to be fair I'm not sure those who came up with the policy are clear themselves exactly what it is yet.

Webb has admitted that the idea was for the financial services industry + FCA to work out the finer details. They've probably been surprised by the regulatory barriers there are to delivering what in theory sounds like a very simple concept.

Castle

This is what Mr Osborne actually told the House of Commons in his budget speech on 19th March 2014.

“And we’re going to introduce a new guarantee, enforced by law, that everyone who retires on these defined contribution schemes will be offered free, impartial, face-to-face advice on how to get the most from the choices they will now have.

Those who still want the certainty of an annuity, as many will, will be able to shop around for the best deal.

I am providing £20 million over the next two years to work with consumer groups and industry to develop this new right to advice”.


Clearly something got lost in translation!

dunstonh

Castle wrote: »

This is what Mr Osborne actually told the House of Commons in his budget speech on 19th March 2014.

“And we’re going to introduce a new guarantee, enforced by law, that everyone who retires on these defined contribution schemes will be offered free, impartial, face-to-face advice on how to get the most from the choices they will now have.

Those who still want the certainty of an annuity, as many will, will be able to shop around for the best deal.

I am providing £20 million over the next two years to work with consumer groups and industry to develop this new right to advice”.


Clearly something got lost in translation!

As mentioned higher up, it appears that that GO was not aware of the issues regarding advice in the regulatory sense and the issues that brings. To be fair, I doubt many are apart from those in the industry and as this came as a shock to industry, it is unlikely anyone was consulted first who would know the advice issues.

Within weeks, the wording had changed to guidance and I suspect that once it was pointed out the cost of providing face to face advice/guidance for everyone in the uk, there had to be back tracking.