PensionsAug 29 2014

IFAs should give pensioners what they want

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Pension savers are not happy, but IFAs should go with the flow and give them what they want, says Bob Campion in this month’s Pensions Spotlight column (£).

A survey by State Street Global Advisers found that just 45 per cent of UK defined contribution (DC) pension schemes members were content with their schemes, compared with 65 per cent in the United States.

Only 26 per cent of those UK respondents believed their DC to be enough for retirement – a sentiment echoed by the UK government, who declared that close to 12 million people are not on track for retirement savings.

Mr Campion said, “What is surprising in the survey of scheme members is not that the numbers are so low, but that members are sufficiently switched on to recognise the predicament they are in.”

The government’s pension reform programme has generated a great deal of publicity around the changes, which has resulted in a better informed public. “Whatever conclusions are being drawn by the archetypal man-on-the-street, savers are at the very least being prompted to have a second look at retirement planning – and they are not happy with what they see,” said Mr Campion.

The pension reforms should be good news to advisers as the changes have caused the general public think more about what they should do to properly prepare for retirement.

“But by dangling the carrot of a lump sum which investors can get their hands on come retirement, everyone seems to be taking notice. That can only be a positive development,” Mr Campion added.

Mercer conducted a survey which found that 62 per cent of employers and trustees plan to offer additional support on top of the free generic advice from the government programme.

Anyone planning to transfer out of a defined benefit (DB) scheme into a DC scheme will soon be required by the government to take independent advice, with the employer paying if it is within the same scheme or at their suggestion.

The main catalyst for increased interet in financial planning advice will be the free guidance provided by the government.

Those who utilise the guidance will have to provide all the details of their pension arrangements, taxes, investments, savings and income requirements, as well as complete a tutorial on the pension options that are available to them, which will conclude in basic suggestions.

If the individual requires any other information beyond this point, they will be pointed in the direction of an independent financial adviser.

Mr Campion said, “In theory at least, clients should arrive at the adviser’s door clued up, paperwork in hand, armed with a government-stamped blueprint of a retirement strategy, ready for their personal recommendation.”

A well-informed client is always preferable and more likely to be open to more complex retirement options, and the adviser will be able to provide much more streamlined advice.