Advising on pension strategies with vulnerable clients

This article is part of
Guide to advising vulnerable clients

She says this plan should be reviewed frequently because “circumstances can change rapidly” and if not addressed, could spiral and make things worse.

Jacqueline Berry, director of My Care Consultant, says it is important to keep an eye on clients as they approach their later years, as this will affect the financial plans that need to be made.

This will affect long-term care in particular. She explains: “All retirement planning should include the consideration that long-term care might be needed at some stage.

“Long-term care is one of the most expensive costs in a lifetime – the second largest expenditure an individual can face after taking out a mortgage. 

“It is, partly, the role of an adviser to make a client aware of this likelihood, and to explain the options available to them in order to afford care later down the line.”

She makes the point the average annual costs of residential care in the UK are now at £30,000 – higher than the average gross salary. 

Self-harm and drawdown

The complexity of pensions freedoms means many people might “self-harm”, as James Dingwall, chief executive of Thistle Investments, puts it. 

They might see headlines about taking cash, or hear from their colleagues about transferring their pensions and not understand the tax consequences, or know how detrimental it could be to them to draw down too much, too soon, from their pension pot.


This affects people without vulnerability – so the situation could be even worse for people with low levels of English or literacy and numeracy, or for those less able to comprehend what can be complicated tax events. 

Steven Cameron, pensions director at Aegon, says the City watchdog is right to warn people of the risks of not getting advice before drawing down their retirement income.

“Those who don’t seek advice risk making poor decisions.” he says. 

But how do advisers explain to a vulnerable individual that if they request a tax free cash lump sum, they may be transferred into an ‘income drawdown product’, as suggested by the FCA’s July 2017 FCA’s Retirement Outcomes Review Interim Report, even if they have no plans around how or when to draw income?

The long-term pension plan

When it comes to the strategies employed for retirement, there are additional “pitfalls” firms will need to help clients avoid, according to Mr Lowe.