According to pension provider LV, unless the government makes proper, independent financial advice available to all, the UK’s pensioners will be sleepwalking into a retirement with unsuitable products, lower-than-expected incomes and a worse financial future than they realise.
As the joint HM Treasury/Financial Conduct Authority Financial Advice Market Review (FAMR) consultation closes tomorrow (22 December), LV published a strident warning that unless something is done now to shore up the advisory market, the government will have a mis-buying crisis on its conscience.
Richard Rowney, managing director of Life and Pensions at LV, said: “We’re on the cusp of a retirement mis-buying crisis. Too few people get the right advice they need. Many won’t shop around resulting in ill-informed investment decisions and buying products that may not be appropriate to their circumstances.
“We need a system where consumers can be assured their lifetime savings are safe and they can get affordable, accessible, regulated advice. It’s up to government, regulators and the industry to make that happen.”
|Points to Ponder:|
480,000 people are entering retirement each year without financial advice
“Mis-buying” crisis likely to hit within the next five years if advice gap isn’t resolved
Average pension pot totals £50,000, meaning £billions of finances could be at risk
Only 23% of people are getting proper independent financial advice
This comes as research in LV’s State of Retirement Report 2015 revealed that less than a quarter (23 per cent) of over 50s claimed to have a good understanding of the reforms.
At least 1 in 10 of people were completely unaware the changes had taken place, despite the announcement being made as far back as 19 March 2014 in the Budget.
The study found that 78 per cent of over 55s do not plan to seek professional retirement advice. The average pension pot now stands at £50,000, the total value of finances potentially at risk could run into billions of pounds.
LV has called on the government to avert this “mis-buying crisis”, and will announce a five point plan to ensure affordable, easy-to-understand and regulated advice at retirement is available to all – at minimal cost to the state.
It’s proposal includes an offer to work with the government to make its online regulated advice service - ‘Retirement Wizard’ - free to access for the most vulnerable.
Bob Champion, chairman of the Later Life Academy, said: “At present, advice is undoubtedly restricted in a number of ways, either via cost, understanding, limited savings, the list goes on.