The difference between guidance and advice is crucial in the reformed world of freedom and choice
Whilst the pension changes offer a great deal of flexibility they also carry many pitfalls and risks, especially around tax and investment loss and the best way to deal with this is for individuals to receive financial education, guidance and advice.
But firstly it’s important for employers and employees to understand the difference between guidance and advice, as receiving financial guidance and education is not the same as obtaining ‘regulated advice’.
It can be a common area of confusion but without regulated advice an employee will not receive personal recommendations which take into account all assets and savings, and they won’t have the same level of consumer protection if anything should go wrong.
What employers can do
To remove some of this confusion, individuals should think about it in terms of what they ‘could’ do and what they ‘should’ do. For example, financial guidance or education tells employees what they ‘could’ do, whereas regulated advice tells them what they ‘should’ do.
If employees only receive financial guidance or education, 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 their 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.
Employers need to be prepared for the fact that they will have employees asking what their options are in the lead up to and at-retirement.
The time has come for employers to know how to support employees with all their choices.
Employers needn’t go it alone as there is a new breed of retirement specialists such as WEALTH at work, who can help by providing employees with financial education and guidance, regulated advice, retirement income implementation and ongoing support - helping them to get the most of the money they’ve saved throughout their working lives.
Reward and WEALTH at work are blogging about financial education, savings and retirement options. FOLLOW THE SERIES HERE