On average, those planning to make a withdrawal from their pension pots would be willing to pay just £253 for advice, a survey has shown.
Website Money.co.uk commissioned One Poll to survey 669 over-55 year olds with a pension and found that just one fifth would be willing to pay for it, dropping to just 13 per cent of men.
Almost 60 per cent said that they do not feel they need it, while almost 30 per cent believe advice is a waste of money, with a similar amount saying they cannot afford it, with 15 per cent claim they just want to access their money quickly and do not want the “hassle” of taking advice.
However, other responses revealed how valuable advice could be, with only one in three of those making a withdrawal admitting they fully understand the tax implications of doing so.
On average, those planning to make a withdrawal from their pension would be willing to pay just £253 for financial advice.
With the average cost of an initial financial review almost double this at around £500 - according to recent Hargreaves Lansdown analysis - many of these people might be in for a shock when they look into getting advice.
Alan Solomons, director of Alpha Investments and Financial Planning, told FTAdviser that the data is not surprising.
“Most people are employees and have no idea what professional fees are - the regulatory burden or of what is required to do a professional job.
“I have been approached by people who just want a piece of paper to show their pension company that they have had advice. Most people have no idea about the impact of compound interest on their funds nor the impact of inflation on their pension.”
Matthew Harris, IFA and owner of Dalbeath Financial Planning. suggested that advisers should offer a low cost hourly service, for under £50 per hour, where they simply sit with clients and advise them on the steps they are taking, the tax implications and how best to fill out the forms that their pension company has sent them.
“We don’t advocate IFAs helping clients to do something that is plainly a bad decision, but we do believe that as long as people are informed of the pros and cons of pension withdrawals then they have the right to make their own choices. IFAs need to adapt to this new world and offer low cost ad-hoc advice.”
The Money.co.uk report also showed that while many said they are not willing to pay for advice, 20 per cent were planning to take advantage of the free session offered by the government’s Pension Wise service.
The website stated that to date, just a quarter of the 85,000 people that have taken advantage of pension freedoms used this service, however the Treasury called these figures incorrect.
A spokesman for the government told FTAdviser: “There is no current data to link users of Pension Wise to people taking advantage of pension freedoms. We do know that over 950,000 people have made use of the service, either online, over the phone or face to face.
“As a first step, anyone looking to find out more about the pension freedoms should contact Pension Wise for free and impartial guidance on their options - including how to look for financial advice.”
Last week a ring round of providers found that just over four months after the pension freedoms came into force, only around a quarter of clients that contact them do so after having used Pension Wise.
Speaking to FTAdviser, Zurich’s head of retirement propositions Rod McKie explained that early evidence indicates only a minority of customers are exploring their options with Pension Wise before contacting them.
“Our research suggests many customers have already made a decision to withdraw cash and are therefore reluctant to consider other choices. Any engagement with Pension Wise is often to validate their decision. However, this trend may change over time as pent up demand for cash continues to fall away.”
peter.walker@ft.com
