One of the problems for retirement savers is untangling the jargon about who gives them advice and who offers guidance.
Pensions minister Ros Altmann says she is confused, so if you are shopping for a Qualifying Recognised Overseas Pension Scheme (QROPS), who can give you the right advice?
The Financial Conduct Authority (FCA) says anyone seeking information about saving into or transferring a pension should also be told about the options of switching to a QROPS, especially if they indicate they may retire or work for an extended period overseas.
This advice should come from an appropriately qualified and experienced independent financial advisor.
IFAs are regulated and have to pass a series of exams to five specialist advice on QROPS and offshore investments.
Not all UK IFAs have this skill set, so they are generally linked with an offshore adviser who has the knowledge clients need to make an informed decision about shifting their pension into a QROPS.
International IFAs dealing with transferring pension funds into a QROPS that are worth more than £30,000 also have a reverse requirement – they must have their recommendations confirmed by a UK regulated IFA.
This is to stop unqualified advisers overseas from giving expats QROPS advice.
Other organisations in the UK can also give financial advice and guidance.
Banks, pension and insurance companies can offer advice – but only about their own products.
The difference between this advice and that from an IFA is the IFA can talk about products offered by any provider on the market.
What is guidance?
Not all IFAs are fully independent. Some have a limited number of provider products to offer, so ask if they can give ‘whole of the market’ advice or ‘restricted’ advice.
The next step down is guidance.
Citizens Advice and the Money Advice Centre all have advice in their name, but can only offer guidance – which is unregulated information about a product or service.
Even the Pension Wise service set up by the government can only guide, not advise.
“People need clarity on what the difference is between advice and guidance,” said Altmann. “Both can be useful but the two services offer completely different outcomes.
“The worry is that ordinary retirement savers do not understand that there is a difference and maybe do not go to the right person to resolve their problems.”