The expressions ‘advice’ and ‘guidance’ have different meanings when you’re looking for someone to help you make the right financial decisions. ‘Advice’ means someone will ask you questions about your finances and personal circumstances and make a recommendation based on an assessment of what‘s right for you.
In contrast, ‘guidance’ means you’ll receive helpful information and explanations to help you make the right decisions, but you won’t be given a recommendation. You have to make your own choices.
(Please note you are entitled to a free guidance session from the government's new Pension Wise service. There is more information on this towards the end of this page).
If you select a firm that offers ‘advice’ someone will review your options for you and make a recommendation of what you should do based on your personal circumstances.
‘Advice’ has a special meaning in this context. People who give advice must meet certain minimum standards and possess appropriate qualifications before they are allowed to give advice. They are also liable for the advice they give, so if the advice they give you is wrong you can take action and seek compensation.
A firm that offers advice will ask for information about you and your circumstances before advising you what you should do.
There’s one other difference you should be aware of: Firms offering advice can’t take a commission and have to charge you a fee for their services (though this can be taken directly from the pension fund). This may be more expensive than choosing a ‘guided’ solution, but it’s not always the case.
If you want someone to explain the options and choices you have, but you are comfortable making your own decisions, this may be right for you. Technically, this is called ‘guidance’. People in firms providing guidance can be as highly qualified about retirement as people offering ‘advice’. They’ll take you though all the issues and explain everything clearly, but they won’t make recommendations. They give you the information you need and explain anything that isn’t clear, but leave the decision making to you.
These companies often get paid by taking a commission and this can be less expensive than firms offering ‘advice’ particularly for smaller funds (though this is not always the case).
Do bear in mind that you’re making the decisions. That means you can’t blame the firm that helped you, or hold them responsible, if you make a mistake or choose the wrong product.
Since April 2015, you are entitled to a free guidance session provided by Pension Wise. This is a new government service. You can access the service online, talk to someone by phone or meet face to face. You should receive details directly from you pension company, but here's the website where you can find out more:
Using the service doesn't mean you can't speak to a financial adviser. Indeed, using the service may make you realise how important it is to seek further help.