Pensions advice or guidance The Tonic

Free advice about managing your pension – or is it guidance?

‘Guidance’ and ‘advice’ are words with similar meanings in everyday conversation, but very different ones in the world of financial planning. Do you know the difference?

For all of us who’ve spent a working life saving into a pension, it is important to know the difference.

Major pension rule changes five years ago swept away many of the restrictions governing how people access their pension money.

Dubbed ‘freedom and choice’, the new policy put the onus on pension savers to take responsibility for making their own decisions.

Do you even know how to manage your pension?!

Even at the time, it was recognised that few of us are pension experts. And so we were promised free, impartial, face-to-face ‘advice’ on how to make the most from our new choices. This led to the creation of the Pension Wise service which meets all these criteria – except it is not technically advice.

In the eyes of the main financial regulator, the Financial Conduct Authority (FCA), there is a major difference between the two terms:

This is a broad term which includes information about different types of investments, to help you understand different options so you can decide, yourself, how to invest. Pension Wise is one of the organisations that provide free guidance.

This is a recommendation that is personal to you, based on your specific circumstances and financial objectives. This can only be offered by FCA regulated firms. You will normally pay a fee for advice.

Free guidance around your pension

Pension Wise can be used by anyone aged 50 or over with a defined contribution (sometimes called a ‘money purchase’) pension. This is the type of pension where the benefits provided are based on the value of the fund you have saved, rather than being linked to the salary you had when you were working (as many public sector schemes are).

If you’re thinking about accessing a pension, then your provider must tell you about Pension Wise. It offers a 45 to 60-minute appointment that can be face-to-face, over the phone or via the website.


95% of Pension Wise customers said they felt confident about being able to avoid pension scams


During the appointment, the options available to you will be discussed. These may include taking a tax-free cash lump sum, using the fund to generate a secure regular income, taking taxed lump sums, or simply leaving the pension untouched for later. The discussion will also cover how each option is taxed, what your next steps might be and equip you with some key questions to ask the firm which holds your pension savings.

People who’ve used Pension Wise rate it very highly. Around a quarter (24%) of people who have an appointment have recommended it to others within one month. 95% of Pension Wise customers who made use of an appointment said they feel well informed about their pension and felt confident about being able to avoid pension scams.

Advice or guidance about your pension The Tonic

It’s not the same as advice though…

While it is highly rated, Pension Wise is not designed to give a more personalised service that includes recommendations. That is the point at which guidance crosses over into advice. This can only be provided by a regulated firm that will charge for its expertise and services.

The financial regulator is keen to encourage more affordable advice solutions to help us make decisions about how we use our pension savings. Technology solutions – sometimes called “robo-advice” – are starting to become more widely available.

They offer cost-effective ways for pension savers to set out what they want from retirement. And how to make sure their savings help them achieve it. Not just at the point of taking pension money, but through the decades of retirement that follow.

Pension Wise may be the closest thing possible to a no brainer in the financial world. It is an independent body that offers useful information and is both free of cost and free of provider bias.

After 40 years of pension saving, is spending 40 minutes taking guidance to review your options expecting too much?

What can I get with my pension retirement checker

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Chris Clarke

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