You may have heard of the terms ‘advice’ and ‘guidance’ being used to refer to help you could access about your pension. But do you really know the difference?
The two terms have specific meanings, and understanding the difference between the two is vital, as one is regulated and comes with legal protection, while the other does not. It’s important that you know which you’ve received or which you need to get.
To help, we’ve written this blog about the differences between the two types, as well as why it’s such an important topic at the moment.
What are the key differences between pensions advice and pensions guidance?
So, what are the differences? Well, there are quite a few. Here’s the list:
Specific vs. generic
Pensions guidance usually takes the form of a general overview of all the options available, and perhaps some key reasons why one might in theory choose each.
With pensions advice, you’ll sit down with someone and explain your situation, and they’ll offer specific advice that explains what options are most appropriate for you.
Takes your history into account
Pensions guidance is produced for a general audience, by somebody who won’t know your specific situation.
With pensions advice, your adviser will ask relevant questions so they can explain the potential risks or benefits of options based on your history and specific needs.
Pensions advice is regulated, meaning those who give it are authorised to provide advice and checked to ensure they’re an expert.
While lots of pensions guidance is provided by trustworthy bodies, like Pension Wise, some is not.
If you make a decision based on incorrect pensions guidance, you have no legal recourse as the information is not guaranteed.
If you seek pensions advice from a regulated professional and that advice is wrong and causes you to lose money, you can actually go to the Financial Conduct Authority and seek reimbursement.
Pensions guidance is available for free. In 2015, the Government created the Guidance Guarantee, which pledged to make free guidance available to all. You can get it from places like Pensions Wise and the Citizens Advice Bureau.
You will have to pay to get pensions advice that’s tailored to you.
Do I need pensions advice or guidance?
The short answer to this question is that it depends on your circumstances and financial confidence. There’s no one size fits all answer. For some people, just getting guidance on the general options out there may be enough to make the right decision on their pension. For many more, they’ll need specialist support to make the best choice for them.
Most people will end up getting both advice and guidance on their pensions. They may, for example, do some general research on the options using a service like Pensions Wise, before engaging a professional pensions adviser to get advice tailored to them.
We’d always recommend getting pensions advice if you’re confused about your options, want to make sure you’re making the right choice, or want to seriously plan for the future. You can find out more about our pensions advice and retirement planning services here.
What’s the problem?
So far this all sounds ok, right? The trouble is, there’s a lot of confusion out there about the differences, with many people not understanding them – or even knowing which one they’ve received.
A recent poll by pensions provider Just found that less than half of people who thought they’d received pensions “advice” had actually seen a regulated financial adviser – which is the only way to receive guaranteed, regulated pensions advice. 18% of people surveyed said they thought they had been advised by Pensions Wise, which – as we’ve mentioned above – is a guidance service that doesn’t offer advice.
There can obviously be grave financial consequences for anybody who makes decisions about their pensions on the basis of guidance, believing it to be advice. If things go wrong, they have no recourse to reimbursement from the FCA, or even any way to check if the information they received was given by a regulated adviser.
At Face to Face, we’re joining the calls to make the differences clearer between pensions advice and guidance, to make it safer for everybody to get the help they need for their pension.
If you’re looking for regulated, guaranteed pensions advice, get in touch. We can help with retirement planning, pensions reviews or identifying opportunities for private pensions.