Pension guidance or pension advice: Do you know the difference?

Here’s what you could miss out on without a financial adviser by your side…

If you’re thinking about making sure you’re getting the most out of your pension, we salute you! Checking your retirement savings are all set for your best possible future is a smart move. And the sooner you can check that everything is on track, the better.

When it comes to finding out if your pension is smashing it, or setting you up for a retirement fail, you’ve got two options:

• seek pension guidance and check your pension is on track yourself. Or,
• ask a regulated financial adviser for pension advice and to manage everything for you.

So, what is the difference between pension guidance and pension advice? And will you miss out in retirement if you take guidance over advice? Here we reveal the key differences you need to know to help you get the most from your pension.

What is pension guidance?

Pension guidance is impartial and does not take into account your specific circumstances. This means that you will not receive an expert recommendation on what you should do with your savings, including whether your pension could be improved.

Instead, with pension guidance you will receive an overview of all the available options on the market. And even then, not all of these options will be specifically available to you.

While some people could find guidance valuable, you’d still need to manage your pension on an ongoing basis yourself.

This would include making decisions about how your pension is invested, keeping an eye on the charges you are paying and regularly reviewing the performance of your fund.

Are my investments protected?

Here’s the biggy: when you seek pension guidance and manage your own pension, any decisions you make regarding your savings will not be protected; you are held accountable if your investments fail. Eek! Keep reading to find out how that’s different when you take financial advice.

Where can I get pension guidance?

Free guidance provided by the government’s Pension Wise service is only available to over 50’s who have a defined contribution scheme.

So, if you are in your 30’s and 40’s, and are looking for guidance on your pension, you could find yourself navigating a sea of complex information on google instead.

Figuring out what’s applicable to your current schemes and what isn’t, can be complicated and time consuming.

If you’re looking for basic information about pensions visit the Citizens advice website or the Money advice service.

What is pension advice?

Pension advice delves into the nitty gritty of all the options available to you, considers what is right for your retirement savings, and specifically takes into account your personal circumstances and what you want your future to look like.

How does financial advice work?

A financial adviser will start by investigating how your current schemes are invested, the charges you are paying, the overall performance, and then compare them to the wider market.

If your pension could be improved, they’ll tell you how, explaining the risks or benefits of moving your pension to a new plan.

At Pension Egg we will give you all the facts and figures you need to make a decision about your pension in a simple report.

We’ll also show you everything you need to know without you having to pay a penny upfront.

Some financial advisers will charge a fee before they will start looking into your current schemes. Find out how much it costs, when any fees are due and how they can be paid, before asking an expert to check your savings for you.

Where can I get pension advice?

Start by checking the FCA database of regulated financial advisers. You don’t have to use an adviser that is based locally to you. Advisers, like those at Pension Egg, can do everything online and over the phone. Making it quicker and easier to check your pension now.

Look for an independent regulated financial adviser, like Pension Egg, who can check the whole market for you and is not tied to recommending you a limited number of pension products.

Are my investments protected?

Unlike if you were to manage your pension yourself, when you use a financial adviser your retirement savings will have additional protection. Providing the adviser is regulated by the FCA, your savings are protected by the Financial Services Compensation Scheme. This means you can get up to 100% of your money back if the provider responsible for your pension fails.

You’ll also have access to the Financial Ombudsman Service, which means additional security around the advice you are given.

What happens if I want to go ahead with the advice?

You won’t need to lift a finger! A financial adviser will take care of the transfer of your savings for you. And you can ask your expert to manage your pension on an ongoing basis for you. Ongoing management includes:

• Regular reviews to make sure your investments match your attitude to risk
• Annual checks to see if your plans for the future have changed, which could mean tweaks to your pension to make sure it matches where you are at in life
• Ongoing market research and evaluation to make sure your provider charges remain as low as possible
• A clear and proven investment strategy to give your savings the best possible chance to grow

At the end of the day, all we really want to know is “will my current pension be enough to support me in my retirement” and “could it be better”? Checking your pension now could mean you are in a much better position for your retirement. With research showing that on average, people are £47,706 better off after they have paid for financial advice1, are you missing out on a bigger pot?

1What it’s worth, published by ILC UK (November 2019)

29 Mar, 2021
Pension Egg