Most people are pretty aware of just how important their pension is. After all, setting yourself for later in life is one of the most crucial things that you can do. The last thing any of us want is to end up having to work every single day for our entire lives. At some point, we all want to be able to retire and that means that you will need to have a pension set up. However, actually dealing with your pension can often be more complex than a lot of people realise, and that means that they can often end up becoming overwhelmed and confused by the process.
A lot of people felt a certain level of relief in 2014 when George Osborne announced in the Budget changes that everyone who was reaching retirement age was entitled to free, face-to-face, advice. This seemed incredibly valuable to a lot of people. However, in the weeks that followed this announcement, the offer of advice was changed to one of ‘guidance’. The vast majority of people likely didn’t even notice that this change happened. After all, at first glance advice and guidance seem functionally the same, don’t they? Well, as similar as they may seem, they can actually be very different on a practical level in terms of what service you actually receive when it comes to your pension. With that in mind, here are some of the differences between pension guidance and pension advice so that you can get a better sense of exactly what help you’re receiving.
Pension guidance
Offered by the government
Pension guidance is the service that has been offered by the government. It is known as the Guidance Guarantee. The government has pledged to provide this guidance for free to all retirees. This does mean that those who aren’t necessarily in a position to pay for professional advice can still get some added information and assistance in better understanding their pension.
A general overview
One of the limitations of pension guidance is that it’s somewhat generic. It essentially offers an overview of the options that are available on the market in general, rather than the specific options that might be right for you as an individual. This means that you might find yourself unaware of certain benefits that might come with your pension. It can also sometimes result in a certain degree of confusion because it can lead to people being informed of certain services and benefits that are technically available, but which they won’t actually be eligible for. Guidance essentially provides you with a framework that you can use to better understand the generic information on the various options available to you. You can then approach a regulated adviser and understand about the right kinds of questions that you should be asking.
No guarantees
Pension guidance might seem like a great option because it’s free, but the truth is that it can often end up costing you more to only use guidance in the long run. This is because guidance doesn’t offer any form of guarantees on any decisions that you ultimately make regarding your pension. This means that, if you make the wrong choices then you could well end up losing money as a result.
Pension advice
Provided privately
Pension advice is not offered by the government and is not covered in the Guidance Guarantee. This means that, if you want or require advice, you need to be able to fund it yourself. Advice is provided by private, regulated advisers rather than by the government itself.
Tailored to your individual needs
Unlike pension guidance, pension advice is able to offer information that is specific to your needs. The advice that is provided is specific to each individual. That way, not only does it tell you what options are available in general, it also helps you understand which options are actually going to be appropriate for you and your needs.
Advisers will take various things specific to you into consideration. This includes your current financial situation, the size of any investments that you have, and your personal goals. Not only that, but they will explain the potential risks and rewards that come with each available option, allowing you to make the most informed decision possible.
Independent
Pension advice comes from independent advisers which means that they can explain all of the different types of investment products. Many restricted advisers will only focus on specific products or providers.
There are options available if you lose money
If you receive pension advice that results in you losing money, then there are services that you can talk to for reimbursements like the Financial Ombudsman Service or the Financial Services Compensation Scheme. That way, you’re much better protected from the risks of having received incorrect information than if you had opted for general guidance.
What should you do?
Your pension can often be a whole lot more complex than you might expect and that means that getting as much information as possible is always important. By all means, take advantage of the Guidance Guarantee. But don’t just leave it at that. Make sure that you’re taking that guidance and using it to better understand the right questions to ask an adviser. Reviewing your pension with someone like Portafina Discovery is always going to offer you a whole lot more help and support than you would get from pension guidance alone. That way, you can be sure that you’re always setting yourself as well as possible for the future.
A lot of people tend to ignore their pensions for far too long, even those who are approaching retirement age. This is often because it can come with a lot of stress that most people would really much rather avoid. However, if you have the right advice then it makes the entire process a whole lot simpler and easier. In light of this, seeking out the best possible pension advice is an essential step in securing your financial future.
