Personal Pension  

Increase in pension freedom enquiries set to continue

Increase in pension freedom enquiries set to continue

Eight out of 10 advisers have seen an increase in new business enquiries as a result of the government’s pension freedoms, according to a poll.

A total of 68 per cent expect to see the number of enquiries continuing to grow over the next five years, according to research among 98 intermediaries commissioned by Investec Wealth & Investment.

Three quarters - 73 per cent of advisers - predict an increase in the average portfolio size held by clients seeking pension freedoms-related advice.

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Of these, a fifth - 22 per cent - forecast the average portfolio will grow to more than £50,000, a third - 34 per cent - to more than £100,000, and 7 per cent to in excess of £250,000.

A total of 17 per cent of advisers are expecting a fall in the average portfolio size.

The research showed a key source of new business resulting from the pension freedoms has been defined benefit to defined contribution transfers, with 68 per cent of intermediaries having received enquiries from pension savers seeking guidance on this issue.

According to Investec Wealth & Investment, on average, advisers predict they will continue to receive DB to DC transfer enquiries from consumers for a further nine years, generating a substantial long-term new business opportunity.

Mark Stevens, head of intermediary services at Investec Wealth & Investment, said: “Advisers have seen strong levels of demand among pension savers as a result of the pension freedom reforms, many of which have involved guidance around DB to DC transfers.

“Our research suggests there is little sign of this new business stream slowing down any time soon.

“Advisers who have had to turn away numerous enquiries from savers whose pension pots have been too small to service profitably will be the first to agree that it’s not the quantity that matters but the quality.

“In this regard, the research paints an encouraging picture with the majority of intermediaries predicting that average portfolios will increase in size over the coming years.

“Given the complexities involved in providing retirement planning advice in a volatile and fast changing investment climate, many IFAs have become increasingly reliant on the support of an experienced discretionary investment manager.”

John Stirling, chartered financial planner at Essex-based Walden Capital, said: “So research sponsored by a discretionary manager who focuses on larger pot sizes predicts that in the main in the future we’ll all be dealing with larger pot sizes, and need discretionary management to do it? Presumably Investec’s share price jumped on the news.

“Whilst I think it is true that demand for advice will continue, and it is also true that most individuals do want advice at their most important financial inflexion points, such as retirement - I don’t think it likely that there will be a gold rush of high value customers who seek and value our advice more than they do already.

“We already see high levels of demand for ‘at retirement’ planning - and I’m sure this will continue, but the average pension pot drops every day with auto enrolment lowering the average (but vastly increasing the breadth of coverage) and the gradual evaporation of historic defined benefit schemes into flexibility.