In the six months since the April at-retirement reforms there has been a “surge” in people accessing financial advice for the first time, according to the chief executive of a pension information service.
Speaking to FTAdviser, Avacade Future Solutions’ Lee Lummis said from a database of about 10,000 people who have come to his firm for data regarding their pension profile, none had previously spoken to an IFA.
From this cohort of clients, Avacade Future Solutions has compiled analysis that points to some interesting trends in the at-retirement market.
Three-quarters (73 per cent) of over-55s have not taken out a cash lump sum since 6 April, despite 60 per cent saying they intended to upon hearing of the changes.
A quarter (23 per cent) cited having already bought an annuity with no plans to turn it into cash, while only 9 per cent actually followed through with taking out a cash lump sum - a drop of around half between intentions and actions.
Further gaps between stated intentions and actual actions were found by Avacade - for instance 13 per cent said they would go on holiday, but only 2 per cent have, and 9 per cent said they would pay off their mortgage, while only 1 per cent have.
Mr Lumis commented that there was a “massive discrepancy” between expectations and reality, especially given the average pension pot size was around £33,000.
Nearly a fifth (18 per cent) of UK adults did not know the total value of their net assets, equivalent to more than 9 million individuals.
Avacade’s analysis found 54 per cent of the UK population have a low net asset value, equivalent to more than 27 million individuals, with an average net asset value for UK adults of £130,463.
According to Mr Lumis almost a third (30 per cent) of respondents with a lower net asset worth of up to £249,000 would consider adopting a high risk strategy if they were aware that their current pension plan would not support them effectively in retirement, equivalent to 6.6 million individuals in the UK.
Of those with a lower net asset worth up to £249,000, 81 per cent considered themselves to be low risk, while 91 per cent of those aged over 55 and with a low net asset value consider themselves low risk.
Mr Lumis added once most people have used his service they feel the need to get “proper advice” and many will opt against taking all their money out once they appreciate the risks involved.
“The problem is, many still want to just put their money into a savings account, as they are put off by all the jargon of the pensions industry.”
peter.walker@ft.com
