Pension Advice Allowance: will your consultation be legitimate?
A simple word change could have a big impact on your pension pot.
Dodgy companies may try to get their hands on the new Pension Advice Allowance by offering you financial ‘guidance’ rather than ‘advice’.
From April, a new law comes in that allows you to withdraw up to £1,500 tax-free from your pension pot in order to pay for financial advice.
However, a pension firm is now warning people that the new Pension Advice Allowance could tempt some unscrupulous firms to try and get hold of the money by offering people assistance, even though they aren’t actually qualified to give financial advice.
The People’s Pension is urging the Government to act to prevent companies from being able to approach people and encourage them to access their Pension Advice Allowance.
The firm wants it to be mandatory that savers consult the Government’s pension advice service before they can withdraw any money.
“Our view is that individuals should only be able to access money for that purpose after a mandatory engagement with SFGB [the as-yet-unnamed new Government pensions advice service] and where the latter recommend that access should occur,” The People’s Pension have stated in a submission to the Government’s consultation on the single financial guidance body.
The concern is that if people can freely access the money then con artists will spring up and take the £1,500 in return for financial guidance, which could be provided by unqualified individuals.
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What’s the difference between guidance and advice?
Giving out financial guidance means simply providing general information to help people understand financial products and terms. It is available for free online, and will be offered by the Government’s new pension advice service.
Financial advice – what the allowance is meant for – involves a private consultation with a qualified advisor that looks at your situation and your financial aims and results in a personalised plan.
The Pension Advice Allowance will allow you to withdraw up to £500 from your pension pot three times, but not more than once a year.
It’s hoped that the allowance will help people get past the initial cost barrier and seek out professional financial advice at several different stages in their life.
“Pensions and savings decisions are some of the most important a person will make during their lifetime. This allowance will help people get the vital financial help they need to plan for their retirement,” said economic secretary to the Treasury Simon Kirby, when the allowance was first announced.
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Comments
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I'm with algy insofar as needing clear and accurate info. I can then decide a course that I'm happy with. I also agree with fenemore; many financial experts are hardly that at all. It would be too costly to seek advice from, say, 5 different advisors and select the path most suggest - providing it fits with your own requirements. MK22 - bit harsh. I bet the "gullible" people are just too trusting of the sharks who will take them for a ride. It's the sharks who should be sought and punished rather than the gullible people denied the freedom of action. Never happens of course.
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Years ago I took advice and that is how I got into the Equitable Life pension mess. That disaster cost me and many others a lot more than £1,500 each. We have been promised compensation but after about 5 years the government has only paid 22%. I just need unambiguous and correct information to read. Then I will make my own choices. My wife and I know our situation best.
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I have a certain amount of agreement with you fenemore over the financial advice industry, and indeed the financed and pensions industry as a whole. Nevertheless, there is clear evidence that people are sufficiently gullible not be trusted with their own pensions. But I'm not holding my breath waiting for this government to come up with anything to help!
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19 February 2017