Burying your head in the sand?
Ian Dempsey DipPFS
The Alexander Isak of IFA’s | Certified coach | With coaching, planning, and advice, I help business owners and directors make their money unstoppable - working harder, lasting longer, and there when it counts.
“The new freedoms for pensions mean that financial advice has arguably never been more important.” Owen Smith MP
The Department for Work and Pensions (DWP) has come under fire after it was revealed that almost nine in ten people are not seeking guidance from Pension Wise when taking benefits from their pension pots. There are also an increasing number of individuals paying into a pension without understanding the benefits they will receive when they retire.
In an attempt to arm savers with the right information, Pension Wise offers free, impartial guidance to those over the age of 50 who are exploring options for their defined contribution (DC) pensions.
Using Pension Wise is a voluntary option, and people should be given the choice to plan their retirement in the manner they see fit.
Ian Price, Divisional Director at St. James’s Place, says that while he agrees that the government has more to do to direct savers to Pension Wise, people should firstly understand what sort of help they’re getting.
“Many people don’t distinguish between ‘guidance’ and ‘advice’, but there is a very important difference,” says Price. “Pension Wise provides guidance. That’s very different to advice.”
As it states on its own website, Pension Wise won’t tell you what to do with your money, whereas a financial adviser will put forward specific recommendations based on your individual circumstances.
“I would not dissuade anyone from exploring their options with Pension Wise, but I would urge everyone to seek financial advice before taking money from their pension pot,” says Price.
Owen Smith MP, has previously stated that there may even be a case for looking at mandatory advice for retirees.
Whilst Price is sceptical about the practicalities of enforcing any such scheme, he is clear about the need for advice over guidance.
“I don’t know how you can force people to get advice,” says Price. “But I agree that people need to prepare for the hurdles they will face in retirement – and the new freedoms for pensions mean that financial advice has arguably never been more important.”