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Guidance bodies ‘worried about advice allowance threat’

Pension Wise jenga

Guidance bodies have expressed concerns that the pensions advice allowance will lead to more people opting for advice even when they only require guidance, Money Marketing understands.

One senior source says in meetings with the Treasury over the pensions advice allowance, guidance providers had given some “push back” over fears guidance could be neglected by people who would be better served by free information rather than taking money out of their pension to pay for regulated advice.

The source says: “There was definitely a divide between public guidance bodies and commercial providers who work through intermediaries.

“They [the guidance bodies] don’t want people thinking they should be seeking advice when they could be doing just as well with guidance.

“I thought we shouldn’t be sitting here demonising advice; if they want it let them do so.”

The source adds some of the comments were at odds with how guidance bodies had backed advisers in public.

Another senior source says the push back could be guidance bodies “sweating that someone is going to steal their lunch.”

The best of both worlds

The pensions advice allowance will be introduced in April. Consumers can access £1,500 early from their pension pot in three £500 tranches, providing the money is used towards regulated financial advice and not taken in the same tax year.

The Pensions Advisory Service chief executive Michelle Cracknell says: “We really think advice and guidance fit really well together. Guidance gets people started, and a lot of the recommendations we make after they have had guidance are that they may want to seek advice. But we can do that after finding out about the issues they are facing.

“Guidance is the foundation level, and we are hopeful people will be encouraged to go there first.

“People don’t naturally think they need regulated advice. Some people can make a decision having had just guidance, other people should have advice.”

Money Advice Service chief executive Caroline Rookes says: “We welcome the pension advice allowance which gives people another way to access the advice they need to make a decision about their pension which will last for the full length of their retirement.

“Our main goal is to create an effective partnership with those providing regulated advice to ensure people are able to make informed decisions about their money. This is particularly true for people who are considering their pension options. The journey from guidance to regulated advice is an important one.

“Guidance should provide the information that people need so they can make informed decisions about their money before they are directed to regulated advice for a personalised recommendation. We’ve seen this work well through our retirement adviser directory which helps people to find regulated pensions advice in their area.”


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. i am sure Michelle Cracknell is fully aware that the pensions advisory service is not allowed to make recommendations so i am a little confused by her statement “We really think advice and guidance fit really well together. Guidance gets people started, and a lot of the recommendations we make after they have had guidance are that they may want to seek advice. But we can do that after finding out about the issues they are facing.

  2. It’s an ‘effective partnership’ paid for by who? Clear, fair and not misleading wins again

  3. “guidance could be neglected by people who would be better served by free information ” One senior source in the treasury should understand that nothing is free and that someone has to pay for this free information.

  4. My view is that most people want / need a three step process:

    step 1 – Toe in water – explain the options and key issues
    Step 2 – compare and contrast the options
    Step 3 – make a decision (take advice)

    One of the problems is that people often build a good relationship with the person they first talk to and don’t like being passed on to somebody else for step 2 and 3.

    This means that in theory you can separate guidance (toe in the water) from advice but in practice most people want the same person / organisation to deal with all 3 steps.

    It is not necessarily about money because by the time people get to step 3 they understand the value for money for advice. The problem is the perception that advice is expensive and complex (which it does not have to be)

    It can be argued that it is more complex if people have to deal with two organisations: guidance and adviser unless there is seamless pass over.

    What is the solution – not tinkering with the advice allowance but solving the problem of the advice gap

  5. Naked fear for their jobs, nothing more.

  6. I really don think they have much to fear for 2 reasons. 1 How many of us can provide proper regulated pensions advice for £500 a go?
    2) How many providers are going to spend the squillions of pounds it takes just to facilitate the odd one or 2 people accessing the pension in this way. HMRC know this but can hold their hands up and say “We have done our bit to allow this to be legitimately done”.
    I would say to the guidance bodies – Relax, breath and take it easy. You are unlikely to be cutting too many jobs.

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