Some of the bigger UK insurers will be unable to provide the government’s free financial guidance to millions of pension customers, under new plans due to be implemented in April 2015. In March’s Budget, the Government stated that consumers would be able to receive free advice on how to manage their pensions and finances, and this announcement gives more specifics on the service.
The financial advice will be given by independent organisations such as the Money Advice Service (MAS) The Pensions Advisory Service (TPAS), as opposed to some of the larger pension providers. These providers argued that they would be able to provide excellent in-house advice, however the government has decided that the advice would be better served coming from companies without a vested interest in selling a financial product to customers.
Chancellor George Osborne appears to be content with the changes to pensions advice and guidance, saying, "It's right to support hard-working people that have taken the long-term decision to save for their future, and I'm pleased that the responses we had to our proposals on making pensions more flexible have been overwhelmingly positive.
"We're making sure that people have the right support to make their own choice about how best to finance their retirement and I'm pleased to confirm that everyone with defined contribution pension savings reaching pension age will get free and impartial guidance on their range of available choices at retirement”.
Osborne’s implementations have been backed by Ros Altmann of pensionsandsavings.com, who believes that the changes will make pensions a much more popular option, and will encourage people to save for retirement and seek pensions and financial advice.
Not all comments have been positive, though. Tom McPhail at Hargreaves Lansdown feels that the advice will be “pretty superficial”, as opposed to “a deep and interactive process that gives you very personalised advice”. Malcolm McLean of Barnett Waddingham suggests that the new implementations will add confusion to an already complex system. He says, “It is still not completely clear how this will work in practice and what the interfaces and overlaps might be with providers and fully qualified financial advisers”.
According to Barclays, the annual amount required to earn a modest yet comfortable retirement is £17,500. Unfortunately, the average expected retirement income is only £15,800 per annum. With this in mind, free financial advice would be most welcome for those heading into retirement, already retired, or those just looking to the future. The question is whether the advice would be incisive and accurate enough on which to base your financial future – can you really get something for nothing?