The Treasury has announced that pensioners will be able to receive free independent advice on their savings and investments from next year.
From the 2015-16 tax year, savers from the age of 55 will be able to utilise their pension funds however they wish. Savers have previously purchased annuities upon retirement through participating in defined contribution schemes where the pension amount is calculated according to the value of investment returns.
The announced advice will come from independent organisations, online or via telephone with some firms offering face-to-face consultations. However, there have been concerns that pension providers could promote inappropriate investments to savers. Furthermore, some have called the quality and standard of available advice into question.
Tom McPhail from Hargreaves Lansdown said: “It is going to be pretty superficial. It is not going to be a deep and interactive process that gives you a very personalised advice. That would be very expensive, so it can’t do that.”
The Treasury addressed such doubts, saying: “The government wants to ensure that guidance is trusted by consumers, and the vast majority, including most of the financial services industry who responded, said that consumers would not trust guidance given by a person or organisation with a vested interest in selling a financial product or service.”
From next year guidance will be delivered by organisations such as the Money Advice Service and Pensions Advisory Service. The Treasury has estimated that 300,000 investors of defined contribution schemes will be able to access an initial 25% of any funds tax-free.