New retirement guidance site criticised as misleading
A new online directory launched to help pension savers access information and guidance when shopping around for retirement options has been criticised for being 'misleading' and biased.
The Pensions Income Choice Association (Pica) directory has not been met with the reception it may have hoped for as industry experts say it lacks vital information and will not ensure that customers receive good outcomes.
The directory is designed to link retirees with specialist intermediaries who 'can help them make the most of their pension pots'. Pica points out that billions of pounds are lost at the point of retirement each year as people fail to make sure they are getting the best deal.
But pensions expert Ros Altmann has called the launch a "wasted opportunity".
Altmann says she had "high hopes" for the service but that "sadly, this directory is more likely to mislead people into buying without advice, from non-advised services that claim that their 'guidance' is at least as good for the customer as 'advice'".
She adds: "Taking independent advice is almost always likely to be better than trying to make this complex decision on one's own."
Patrick Connolly, certified financial planner at Chase De Vere, says the idea behind Pica is "really good" but "it currently falls short of providing genuinely useful and impartial information".
Connolly says the confusion between the words "guidance" and "advice" is a major problem. He points out that the site suggests that "advice" is either cheap or free, when it is actually talking about "guidance", which is essentially an execution-only service because it requires individuals to make their own decisions and leaves them with no comeback if that decision is the wrong one.
He adds that while not everybody needs to take financial advice, "buying an annuity is one of the most important financial decisions that people will make; their choice cannot be reversed and if they do get it wrong the implications can be huge".
Connolly says that anyone with investments of more than £50,000 or an income of more than £75,000 per year should be looking to take advice, ideally from an independent adviser.
Describes the relationship between a client and a stockbroker or independent financial adviser whereby the broker or adviser acts solely on the client’s instructions and doesn’t offer any advice on which shares to invest in or financial products to buy and simply “executes” the wishes of the client, regardless if they are judged to be sound or wrong. Other types of broking service offered are advisory (whereby the client/investor makes the final decisions, but the broker offers advice) and discretionary (whereby the broker manages the portfolio entirely and makes all the decisions on behalf of the client).
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.