New free pensions guidance service unveiled
The government has unveiled its new free pensions guidance service, which will help retirees take advantage of the new pensions rules which come into force in April.
'Pension wise: Your money. Your Choice' will provide free and impartial information and guidance to people with defined contribution pensions approaching retirement.
In the April 2014 Budget, chancellor George Osborne announced that from this April, retirees will be able to use their pension savings as they wish. In order to help savers make the most of the new freedoms he pledged that every retiree should have access to some financial guidance.
The service will be provided by The Pensions Advisory Service (which is recruiting around 35 specialist "guiders" and will provide guidance online and over the phone), and the Citizen's Advice Bureaux, which will cater for retirees seeking face-to-face guidance. The guidance is expected to last around 45 minutes, with a list of defined questions that "guiders" will have to cover.
Afterwards, consumers will be provided with a summary document of their session "so that they can proceed confidently".
Andrea Leadsom, economic secretary to the Treasury, said: "People who have worked hard and saved all their lives will be free to choose what they do with their money from next April. We want people to be empowered to make informed and confident choices.
"'Pension wise' will be a first port of call for people with a defined contribution pension who are approaching retirement. It is a distinctive brand, making it easy for consumers to know where to go for help and guidance."
Initially, the government had chosen the Money Advice Service (MAS) to also deliver the guidance, but after concerns were raised by retirement experts about its capacity to do so, the MAS was removed from the equation, though it is understood it will support some areas of online guidance.
Financial advisers, however, remain concerned that the guidance will not meet the needs of consumers with more complex retirement planning demands, who would be better off seeking qualified independent financial advice.
Nevertheless, Dr Ros Altmann, the government's business champion for older workers, welcomed the announcement, saying: "It is absolutely right that we invest in helping people make the best decisions from their retirement savings. Until now there has been no help with the complex decisions people face when they reach retirement age and at last there is an independent source of help to point people in the right direction."
Government figures suggest that more than 300,000 savers in defined contribution schemes a year will be retiring. From the age of 55 they will be able to access their pensions as they wish.
The government is to make it illegal for anyone to imitate the 'Pension wise' service, which it says will help "protect consumers" and "ensure the guidance brand is trusted". It means anyone seeking to pass themselves off as the service could face prosecution.
There is no official start date for the launch of Pension wise, although the Treasury had quietly hoped to launch it by the Easter weekend. In the meantime, anyone with a defined contribution pension who is approaching retirement can register to take part in the government's pilot scheme for Pension wise by visiting gov.uk/pensionwise.
Find out everything you need to know about the new pension rules and how to plan ahead for the retirement you deserve with our new magazine, How to Retire in Style. The magazine is available to buy now from all leading newsagents, or can be ordered online atmoneywise.co.uk/retire
Defined contribution pension
Often referred to as a “money purchase” scheme, although offered by employers (who may pay a contribution) these pensions are more likely to be free-standing schemes that a person contributes to regardless of where they are employed. Here, the level of benefit is solely dependent on the accumulated value of the contributions and their performance as investments. Therefore, the scheme member is shouldering the risk of their pension, as the scheme will only pay a pension based on the contributions and investment performance. The final pension (minus an optional 25% that can be taken as tax-free cash) is then commonly used to purchase an annuity that would provide an income for life.