Annuity provider MGM Advantage has called for future retirees to be compelled to take guidance that has promised as part of a shake-up of the at-retirement market, after a study of 2,000 over-55s found found a lack of interest in receiving advice despite poor knowledge of product options.
Andrew Tully, pensions technical director at MGM Advantage, called for ‘soft compulsion’ for consumers to take guidance after the study found more than two in five respondents were not aware of all product options but a third said they would not ‘value’ financial advice at retirement.
According to the research, one third of UK adults aged over 55 and not yet retired said they would not value financial advice when retiring at all, with this rising to 38 per cent of those with household incomes under £30,000.
Around 38 per cent of the 2,000 respondents aged over 55 said they have never sought advice about retirement finance options. Of these, 31 per cent say they are confident enough to plan their own affairs, while 12 per cent say they do not want to talk to anyone else “because their financial affairs are private”.
The research found that 41 per cent are not aware of the different products and options available to them to generate retirement income, with this rising to 45 per cent of those with household incomes of under £30,000, and almost half of women.
The research also reveals that 44 per cent of those aged over 55 believe they do not need a financial adviser while 36 per cent did not even know what a financial adviser is.
When asked which sources they have used for retirement finance advice, a quarter said they had used a financial adviser, 20 per cent said internet websites, while 18 per cent trusted their pension provider and the same proportion have consulted their family.
The results seems to reinforce previous findings from a study by the National Association of Pension Funds, which points to more than a quarter favouring impartial, regulated advice.
All of these findings seem to suggest the existing audience for full financial advice will remain, but that the sector could miss out on a major boost from the pension changes as few among the wider population are prepared to pay advice fees.
Andrew Tully, pensions technical director at MGM Advantage, said the guidance guarantee is a “crucial piece of the Budget jigsaw”.
He said: “Given the need for proper financial advice is even more important after the Budget proposals, it is extremely concerning that so many people do not value it and believe they are able to make decisions about how to best finance their retirement by themselves.
“If people do not seek expert help when considering their options for retirement, we could see many people making poor choices, such as paying too much tax, or investing in poor value solutions.
“We need to think about the lessons learnt from auto-enrolment, as there we have a form of soft compulsion to save. Perhaps similar prompts to use the guidance service should be considered, to ensure most people have a basic level of understanding of the myriad of options which are likely to become available before making any decisions.”