Many people don’t understand the difference between financial advice and financial guidance. However, knowing it is essential to maximising your pension fund.

As you approach retirement, you become eligible for free and impartial pension guidance. The government introduced this entitlement in 2015 under their Guidance Guarantee. Two organisations that provide pension guidance are the Citizens Advice Bureau or Pension Wise, the government’s pension advisory service.

The guidance you receive from these differs from professional advice from professional advisors in a few aspects. The following paragraphs give you the essential factors of each.

Pension Guidance

• Pension guidance will present you with an overall market appraisal in terms of what is available. However, not all products will be available to you.
• It provides general information rather than focusing specifically on your financial situation.
• The guidance you receive comes with no recommendations or guarantees.
• It is free in line with the Guidance Guarantee.

Professional Pension Advice

• A professional advisor can advise you on the best options for your financial situation.
• Professional advice is specific to the individual receiving the advice. It considers your age, investments, financial goals, etc. You will receive advice on the benefits of different products and get offered recommendations.
• Professional advice is generally not free. You may have to pay before receiving any advice, or you might receive a limited amount of advice at no charge to get you to take on the advisor’s services.
• If you receive poor advice that causes you to lose money, you can take your issue up with the Financial Ombudsman or the Financial Services Compensation Scheme. If your financial advisor is FCA-regulated, you could receive compensation.
• To help you find a suitable advisor, the FCA maintains a database of all its regulated advisers. You should check this database before entering into a contract with any financial advisor.
• On average, people who get professional financial advice amass around £30,991 more wealth in their pension funds than those who don’t. This statistic is according to ILC UK data from 2019.

Guidance or Advice?

You will find pension guidance of particular use if you need an introduction to your pension options. However, if you want help with specific aspects of your situation, professional advice is more suitable.

Do You Need a Financial Advisor?

If one of the following situations applies to you, you must seek financial advice from a regulated financial advisor:

• You are part of a final-salary or career-average pension scheme, also known as a defined-benefit scheme, with a value greater than £30,000, and you intend to transfer to a defined-contribution pension.

• You have a defined-contribution pension with a value greater than £30,000 with guaranteed payment on retirement, and you intend to use your pension pot for something else.

Even if you have less than £30,000 in your pension pot and want to do either of the options above, you should get professional advice.

Should You Choose An Independent Or Restricted Advisor

Before you commit to using a financial advisor, you should know if they are restricted or independent. So, ensure you ask when you first contact them.

Remember, restricted advisors cannot offer you whole-of-market advice or products, whereas independent advisors can.

Conclusion

Hopefully, this brief article will help you understand the difference between financial guidance and financial advice so that you can make better decisions about your pension. When looking at options for your pension, get in touch with a regulated financial adviser such as Portafina or, view the info at Pension Wise.

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