The Treasury has rebranded its ‘guidance guarantee’.
The ‘guidance guarantee’ was one feature of the new pension tax regime on which the Chancellor placed considerable emphasis when he made his surprise Budget announcement last March. The initial consultation paper said “…choice on its own is not enough. Consumers need to be able to make informed decisions. We will therefore guarantee that individuals approaching retirement will receive free and impartial face-to-face guidance to help them make the choices that best suit their needs.”
Although Mr Osborne used the word ‘advice’ in his Budget speech, it became clear very soon that free advice was not being offered. Similarly the ‘face-to-face’ aspect was quickly watered down to less expensive forms of communication, such as a telephone based service. Initially the government said that the Pensions Advisory Service (TPAS) and the Money Advice Service (MAS) would be the two main bodies to supply the guidance. However, in October, less than six months before the new rules begin, the MAS was replaced by the Citizens Advice Bureau.
In January the Treasury “unveiled the name and logo of the new pensions guidance service”: Pension wise. In theory this service could have to deal with “over 300,000 individuals a year” and “will be a first port of call for consumers” approaching retirement with defined contribution pension plans. In practice many pension people are sceptical about what Pension wise can deliver. Not only are there question marks over finding and training appropriate personnel in such a short timeframe, but there are also concerns that what many near retirees want is advice, not a guidance shopping list from which they have to choose. Any complaints about the guidance will go to the Parliamentary and Health Service Ombudsman, rather than a financial services regulator/ombudsman.
If you are nearing the point at which you want to start using your retirement fund, then we believe your starting point should be to take professional advice. Pension wise will not deliver ongoing advice based on a full knowledge of your personal circumstances. Although it will be free, it will be generic information and, more importantly, a one-off exercise. Next year, when your 12 months old pension arrangements need review, you may need more detailed information.
The value of tax reliefs depends on your individual circumstances. Tax laws can change. The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
13th February 2015