UK government unveils planned pension guidance service, as figures show £6bn could be released under new freedoms

The financial services regulator intends that its rules governing communications with pension savers take effect in "good time" before new flexibilities over access to pensions take effect in April, according to an update on the so-called 'guidance guarantee' published by the UK Treasury. The new requirements will apply on Royal Assent of the Pension Schemes Bill, which is currently before the House of Lords, according to the note.

The new service will be called 'Pension Wise' and will be accessible online, by telephone or through a Citizens Advice Bureau, according to the Treasury update. Telephone and face to face guidance sessions will need to be booked, in order to give savers "the time they need to gather information and prepare for their guidance", the Treasury said.

More information emerged about attitudes to pension saving as research commissioned by Channel 4's Dispatches programme suggested that savers would withdraw up to £6 billion from their pension schemes in the first four months following the introduction of the new freedoms. This figure is three times higher than the government's official estimate. Dispatches also claimed that almost half of those currently eligible to take advantage of the new freedoms intend to withdraw some or all of their money.

From April 2015, members of defined contribution (DC) pension schemes will have more freedom to access their pension savings in any way that they wish from the age of 55, without facing heavy tax penalties or necessarily having to buy an annuity. This new freedom will be backed by a right to guaranteed free and impartial guidance at the point of retirement.

Face to face Pension Wise guidance will be provided by the Citizens Advice Bureaux in Scotland, Northern Ireland and England and Wales, while telephone guidance will be provided by the Pensions Advisory Service. All official delivery partners will use the Pension Wise name and branding. Guidance will be tailored and personalised, but will not recommend specific steps, products or providers in the same way as regulated financial advice.

The FCA will set minimum standards to be followed when guidance is provided, but will not formally regulate designated providers. It published its near-final rules for delivering its statutory duties in November. The draft standards would require individuals delivering the guidance to have a certain level of skills, knowledge and expertise; including knowledge of the different types of pension schemes, different fees and charges and the tax treatment of pensions and general income. They would also have to be able to recognise the circumstances in which a consumer may require regulated financial advice or specialist debt advice.

According to the Treasury update, telephone and face to face guidance sessions will initially be offered as a single session per customer, although it said that this would be kept "under review". It said that initial user research pointed towards a 45-minute session as the "optimum" length. The Treasury will meet the initial set-up costs of the service, which will be funded on an ongoing basis via an annual levy on regulated financial services firms. The FCA has estimated a total cost to firms of £35 million for the first year and will confirm this figure in March. In the first year of the service, the Treasury will meet any costs over and above the value of the levy and reclaim them from the following year's levy, according to the update.

As previously announced, the government intends to make imitation of the Pension Wise name and brand illegal via an amendment to the Pension Schemes Bill. Firms or individuals found guilty of passing themselves off as the service could be fined or subject to one year's imprisonment.

"The challenge for the government is to create a brand which is strong and distinctive; it's in everyone's interests for savers to trust it and engage with it," said pensions expert Helen Hanbidge of Pinsent Masons, the law firm behind Out-Law.com. "It would be a shame if Pension Wise guidance were to get lost amongst all the other pensions information already out there."

"But the government can only do so much on this and, realistically, by the time savers reach retirement age, their options will often be fairly limited. The interesting conversations for employers and the pensions industry will focus on how they can make defined contribution schemes work for savers. This is likely to involve advice and engagement well before retirement, and some employers are starting to explore the possibilities," she said.