Earlier this year the Chancellor announced a radical shake-up of the UK pensions system, with a key change being the promise of a "guidance guarantee" – where those approaching retirement will be given free information on the financial choices they face, ideally helping them become more engaged in financial planning to help ensure they can maximise their income throughout retirement.
It's a great idea in principle and will hopefully mean more retirees are properly financially prepared for old age, but there's a clear desire for this retirement advice to be wholly impartial – in other words, not given by the individual's current pension provider.
Research from MGM Advantage has revealed that 83% of over-55s surveyed think that the guidance offered should be impartial and independent from pension providers, with only 5% thinking that impartiality wasn't an important characteristic. Trust is set to play an important part in the delivery of the service too, with those approaching retirement needing to feel confidence in the advice they're receiving.
That perhaps explains why 24% thought existing organisations like Citizens Advice Bureau or The Pensions Advisory Service would be the most trustworthy and therefore the most suitable organisations to provide the advice, while 23% would trust financial advisers to do the same. A further 21% would trust a new Government agency if one were made available, while the same amount would prefer a completely new, and independent, financial organisation to be set up.
Highlighting the lack of faith in pension companies, just 12% of respondents said they'd trust their existing firm to provide such a service, arguably because they might view it more as a sales pitch rather than truly impartial advice on the options that are available.
"As the industry debates the pros and cons of the new guidance service, it seems trust will be crucial in making it work effectively," said Andrew Tully of MGM Advantage. "What comes across strongly is the overwhelming number of people who thought the service should be impartial and independent from pension providers. This is important because we are building a service not only for the retirees of today but also for future generations."
As it stands the guidance could well be dominated by pension fund providers, and that means a lot of pre-retirees could be missing out – particularly if they don't act on, or even trust, the guidance given. Planning for later life is a vital part of proper financial management and it's important those approaching retirement have faith in the advice they receive, and while the promise of impartial guidance will hopefully come to fruition next year, in the meantime seeking proper financial advice should always be considered.
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