Free Guidance Given in Pension Reforms: “It’s Not My Money, It’s Your Money”
Recent plans to revolutionise pensions have been revised, with the government saying that savers will be able to receive free, independent and impartial advice when given unrestricted access to their pensions from April 2015, meaning they will be able to use their own pension in the manner they see fit.
At the moment, when a person retires they have to decide whether they wish to take out up to 25% of their pension pot value. But what happens if something happens later on that requires a lump sum? These people have been saving for most of their lives and should be able to get access to their savings if the needs arise, and this is what the Treasury is going to allow when the reforms kick in next year.
Concerns had previously been raised about how a proposal in which advice is given to savers about their pensions could lead to unsuitable investments being recommended, but it has now been revealed that the guidance will be given through independent organisations, such as Age UK and the Citizens Advice Bureau.
“The government wants to ensure that guidance is trusted by consumers,” said a spokesperson for the Treasury, “and… customers would not trust guidance by a person or organisation with a vested interest in selling a financial product or service.”
Pension providers will be required to tell people who are approaching retirement that there is guidance available for them, for free. Information about pension choices will also be offered over the telephone and on websites, which may be preferable for some people, though face-to-face meetings can also be requested.
There have been some suggestions that when it comes to spending their pensions, people will be using their funds up early on and falling back onto state support afterwards, but these claims have been dismissed by Chancellor George Osborne, who said that these concerns were unfounded and patronising.
“You’ve worked hard, you’ve been responsible, you have saved for your retirement. You know better than anyone how you want to use that money,” he declared. “And if you have this new free and impartial guidance, you can be directed towards the right choices for you.”
Chancellor Osborne explained that people should have the freedom to access the money they have worked so hard to save and that the best information should be available to them without the “patronising view” of a state claiming to know how people should spend their own money.
Other changes will see a cut in death taxes, meaning that pensioners will be able to leave more money to their children after they have died.
“It’s not my money, it’s your money… and that is what this fundamental reform of pensions is all about.”