Will Citizen Advice Bureau Be Ready to Give Pension Advice by April 2015?

Written by Karen Bryan

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citizens advice bureauI read that the Citizens Advice Bureau (CAB) had been chosen to deliver the face-to-face free advice under the UK Government’s pension guidance guarantee. The Government has pledged £20m to pay towards independent pension advice for people.

The Government’s pension guidance will be available to people with defined contribution (DC) and private sector defined benefit (DB) pension schemes.  DC schemes have no guarantees of pension income, while DB schemes guarantee a pension income (usually based on number of years of service and contributions).

That £20m won’t all go to CAB, as The Pensions Advisory Service (TAPS) will be responsible for delivering pension guidance over the phone, and an online advice service is being developed.

TAPS staff already specialise in giving advice on pensions. Whereas CAB staff deal with a whole raft of issues. I wonder if there is time and sufficient funding for CAB Staff to receive specific training in pensions?

An estimated 600,000 people will reach UK state retirement age every year until 2018, meaning that the numbers seeking advice is likely to be high. Do CAB have an adequate national network and the staff to cope, especially in the wake of recent cuts in funding?

There are so many issues to take into account when giving pension advice. Below are just a few:

  • People with a DB pension may be tempted into transferring out of that scheme in order to access the cash in their pension pot, but will they be fully aware of the implications of the loss of guaranteed income after retirement?
  • Will people withdrawing their pension pot as cash be aware of the income tax implications?
  • What type of annuity should be purchased, joint life, index linked, level, or a set percentage escalation?
  • If people opt for income drawdown from their pension pot, how much should they withdraw per year?
  • Will there be time to look at pension provision in the context of the individual’s financial circumstances such as other savings, spouse/partners pension provision?
  • Will the advice given be so generic as to be pretty useless.

I had a DC stakeholder pension. I spent a long time researching pension options, including consulting an online financial advisor over several online and phone sessions, and was still confused about what I should do with my pension pot. In the end, I decided to buy an annuity with RPI escalation (an inflation proofed income for the rest of my life).