Independent organisations such as the Money Advice Service to provide guidance.
The Treasury has published further details of its plan to overhaul pensions, including confirmation that millions will be entitled to “free and impartial guidance” on what to do with their pension pot.
When Chancellor George Osborne first announced his plans to rip-up the existing pension format, he said that he wanted those reaching retirement to benefit from “advice”. However it wasn’t clear who would actually provide that advice.
We now have confirmation that instead pensioners will receive impartial “guidance”, which is a more palatable term for financial regulators, as advice is a far more involved process. That guidance will come from independent organisations, including the likes of the Pensions Advisory Service and the Money Advice Service, rather than pension providers.
The idea is that this guidance will be provided by organisations that cannot sell products, so their guidance can't be motivated by profit.
While Osborne originally announced that this help would be available in face-to-face settings, that has now been extended to include an “online tool” and help over the phone.
Your pension provider will be obliged to tell you about the guidance on offer, and will arrange it for you.
Transferring pensions
People with defined benefit, or final salary, pension schemes will also be able to take advantage of the added flexibility of the Government’s pension changes, which allow you to do what you want with your pension pot.
Defined benefit pension schemes offer a guaranteed pension income based on your years of service in a certain job. They tend to be the exclusive preserve of public sector jobs these days as they are an expensive option to offer. People with these pensions were initially excluded from the new pension flexibility.
By contrast, defined contribution, or money purchase, schemes are where you and your employer pay into a pension pot. The income you get in retirement depends on the performance of your investment. There are few options for people in these schemes at retirement, and most buy an annuity, which provides an income for retirement. However, this will no longer have to be the case.
Most people will be better off sticking with a defined benefit scheme, though they will have the option of transferring over to a defined contribution scheme.
It could be a very costly decision though. In order to transfer they will be obliged to take advice from an independent financial adviser first.
And the trustees running the pension scheme will have the option to delay the money being transferred, or even reduce the value of the transfer, if the pension scheme risks being unable to meet its promised payouts to other members as a result of the transfer.
When is this happening?
The changes come into effect from April 2015.
More on pensions:
THE WORST PLACES TO PUT YOUR PENSION
WHY WE DON'T TRUST PENSION FIRMS