What is Independent Pension Advice and why would you need it?
When people want advice on the best way to manage their existing pension savings portfolio, plan for retirement or make an investment, they usually want to speak to an independent financial adviser to make sure they get the best advice possible. But what exactly is independent pension advice and what does it involve?
Independent pension advice is a type of financial advice that is given by an unbiased financial adviser. To give fully impartial and unbiased pension advice, an independent financial adviser must research and consider all retail investment products and providers in the market to make sure they meet the client’s needs.
Everyone’s situation is different, with different goals, personal situation and types of assets and savings and it’s important for everyone to get the best financial advice possible for their unique situation. This article runs through the different types of advice you can get, what it involves and how much it may cost.
There are many areas covered by independent pension advice, both in areas of advice and the different types of financial products that can be used to help your retirement. Everyone’s situation is different and will likely require a different mix of areas of advice and types of pension products. A good independent pension adviser should be able to cover areas such as:
It is useful to have the option to consider a range of different solutions to find the right combination for your situation. An independent pension adviser who covers a range of areas should be able to help you work out the best retirement and pension plan.
One of the best ways to get options when looking for an independent financial adviser is to ask family and friends for recommendations. Often the quality of an adviser only becomes apparent when working with them.
However, everyone’s needs are different, and the style of one adviser may appeal to one type of person, but not to another. It is always a good idea to look at a few before making a decision.
Online reviews can be a good place to see what others in the local community have experienced, with Google Reviews having the largest number.
Please be careful of many online “review” and “recommendation” sites as they are rarely fully independent and often match you with the ones that pay the most or simply whoever is closest to you (such as Unbiased).
The FCA Register holds information on all regulated Independent Pension Advisers in the UK. It will not tell you the quality of service you can expect, but it is the final authority on what an adviser or a firm is regulated to do. If an adviser of a firm does not appear on the register then they are not authorized to give financial advice in the UK.
A good IFA will be happy to give you an initial consultation and at no cost to you, and should be able to discuss what services they offer, what they are likely to cost and in general give you a good idea of the type of adviser that they are. Talking to a few advisers should help you determine the best fit for you, with what is an important decision.
When you receive independent advice you’re advised on the full range of products and providers in the market. However with restricted advice the range of products and providers you’ll be advised on is limited, often to those offered by the employer of the adviser. e.g. they could be working for a bank offering only their products or for a Financial Advice firm that only offers certain products from the company they work for.
A Restricted Financial Adviser should explain what they’re restricted to and what effect this will have on the advice they will give you.
For more information on the difference between an Independent Financial Adviser and a Restricted Financial Adviser please refer to our article on this topic – The difference between an independent and restricted adviser.
With an “advised sale”, you will get advice about the service or product you’re receiving. This would involve explaining why the particular product or provider would meet your demands and needs and giving a recommendation that is tailored to your individual, specific needs and situation.
A “non-advised” sale means you are given generic information only about the product and it is left up to you to decide how you wish to proceed. You do not receive a personal recommendation. Non-advised sales tend to have much less in the way of protection if the product turns out to be unsuitable.
When referring to independent financial advisers, there is an important distinction between “advice” and “guidance”.
“Advice” is a professional service that will result in a recommendation on a clear and specific course of action based on consumers’ individual circumstances and goals. Such as advice on when to take a tax free lump sum or where to invest. On the other hand, “guidance” provides only information or options to help narrow down a consumer’s choices, without actually making an explicit recommendation.
“Advice” may only be provided by a regulated individual and is protected, which means you can complain to the Financial Ombudsman Service. “Guidance” can be provided by a wide range of individuals and organisations which may or may not be regulated.
Apart from a few specific situations*, there is generally no legal requirement to seek financial advice regarding your pension, but it is often wise to do so. Generally, the more complicated your situation and the larger the pension pot the more advice will be able to help you.
As there is no set type of pension advice, everyone’s situation is unique and there are no hard and fast rules for the right time to seek financial advice. However, we would always recommend speaking to an independent financial adviser for the best retirement advice, many offer a free consultation so that you can understand the service they offer and how it would benefit you. In general, an independent pension adviser should be able to help you understand your personal circumstances, your pension options and work out the best course of action for you.
*the main exception is transferring a defined benefit pension with a value over £30,000.
You are currently, under the pension freedom act 2015, able to access your Defined Contribution pension pot from age 55. This is due to increase from 55 to 57 in April 2028. There are now a number of choices when it comes to withdrawing from your pension. These are:
Not all pension plans may offer all of the above options. For example, many workplace pension schemes may only offer a choice of an annuity. However, you are able to transfer to a different pension provider that offers all the options, with a transfer generally a straightforward process.
To find out more about the different ways of withdrawing from your pension please read our more detailed article – Ways of withdrawing from your pension.
It can be possible to withdraw from your pension while continuing to work. To find out more please read our article – Can I take my pension at 55 and still work?
Ultimately the cost of pension advice will depend on the type of advice you are receiving. Some matters are more straightforward whilst others can be very complicated and time-consuming to sort out. In all cases you should make sure that any fees are discussed up front, are explained clearly and you understand what you are receiving in return and that you are happy to proceed.
In our own case, we always make sure we explain clearly what the costs will be, and as we are one of the few adviser firms to offer fixed rate pricing, we make sure we tailor the cost to your specific situation, often offering a range of prices and service levels.
There is no standard way that an adviser charges and they may charge a fee in a variety of ways:
In terms of Initial fees, they can range from 0.5% to 5%, with historically many charging 3%. Ongoing fees can range from 0.5% to 2.0%.
It’s important to remember that since 2012 advisers are no longer able to be paid a commission for recommending a certain product provider. This change was bought in to make sure that all advisers were transparent about their charges, whereas before some would masquerade as being “free” or very low cost, where the fees were often hidden away.
You can get free advice that will help answer the technical aspects of your queries but because it’s free, it’s limited in scope and often doesn’t address the bigger picture questions. If you do need free advice:
You can get free guidance on your retirement savings options from:
Our pensions are one of the most important and valuable things we will have in our lifetimes. Getting the right advice can be a big help in making sure that your pensions are right for you and your situation.
Independent Pension Advice can help you in determining the right course of action and it’s important you find the right adviser for you. Make sure you shop around and ask for as many recommendations as you can. Take advantage of the free consultations that many pension advisers offer. Don’t be afraid to ask about costs and make sure you fully understand them and also the benefits you are likely to receive in return.
We are Independent Pension Advisers and are always happy to have a chat about pensions or any other form of financial advice. Please get in touch and we’d be happy to help.