It’s important for employers and employees to understand the difference between guidance and regulated advice. Without regulated advice an employee will not receive personal recommendations based on what is suitable for them


The Citizens Advice Bureau and the Pensions Advisory Service are the two services running Pension Wise – neither of which can actually give employees regulated advice on their choices.

With names like these involved, employers can be forgiven for the confusion over who is able to offer regulated advice and who can give generic education and guidance.

To remove some of this confusion, employers need to think not about what the organisations involved in Pension Wise are called, but rather where the difference lies between ‘could’ and ‘should’.

Put simply, education or guidance tells employees what they could do, whereas regulated advice tells them what they should do. We must focus on making the distinction.


Pension Wise is what you could do, not what you should do. If people get education through their employer or Pension Wise, at the end of that process they still have to make a big decision about their pension and indeed other savings which may contribute to retirement income – employees will need to decide if they really are confident about doing that on their own, or if they think they need regulated advice.

Think of it in terms of buying a kitchen. It’s an expensive item to buy, and having spent thousands of pounds on your new kitchen, you wouldn’t then fit it yourself – for a comparatively small cost, you’d get an expert to do it. If you do it alone, and don’t fit your kitchen correctly, things could start going wrong – and that’s the situation you can end up in with your pension.

You’ve been saving for years, and then you get the education and guidance on the choices you can make, but when it comes to implementing those choices are you going to do it yourself or get expert regulated advice?


The more flexibility there is, the greater chance of people making the wrong choice – but there’s also a myth surrounding the cost of taking regulated advice that needs to be dispelled.

The FCA consumer panel demonstrated in their research that many employees who bought annuities without regulated advice suffered because the commissions they paid were often just as high, if not higher than paying for regulated advice, so there is no cost-saving there. Also and perhaps more importantly, if they make the wrong choice, there is significantly less consumer protection.

We need to remove the myth around regulated advice – because it is not necessarily any more expensive than any other option and you also have greater consumer protection in the event of being poorly advised.

Regulated advice is holistic: it will take into account your personal situation and that of any partner, and also all your assets and savings – not simply your pension pot, but also ISAs, shares and so on. An adviser should then give you, based on your risk profile and what you’re trying to achieve, an appropriate recommendation about the choices you should make.

Some companies have been discussing their employees’ options for months, so that they started understanding what their options are by the time the freedoms arrived.

However, this was a minority of companies. A lot of others are dragging their feet and waiting to see what happens before they decide what to do.

Employers also need to be prepared for the fact that whether they have given financial education or not, they will have staff asking what their options are and asking to take their money – and they have to be prepared with an answer to that.

Employers can’t just wait to see what happens – the time has now come for them to know how to support employees with all their choices and processes. Even if their staff are in the dark, they must know the difference between the ‘could’ and the ‘should’ of the new freedoms.

Jonathan Watts-Lay will be speaking THIS WEEK at Reward Live - see him speak at 12.45 on Wednesday. For the full programme, please CLICK HERE.

Wealth at Work