Personal Investment Management & Financial Advice Association (Pimfa) wrote in its response to the Work and Pensions select committee inquiry on pension costs and transparency, the government had to do more to nudge people towards seeking advice.
Simon Harrington, senior policy adviser at Pimfa, said greater take-up could only be achieved if people understood the "implicit value" of advice, therefore initiatives such as the advice allowance were a way to achieve this.
In future the allowance, currently set at a maximum of three instalments of £500 of retirement savings each, should be increased or consolidated into a £1500 lump sum, he stated.
The pension advice allowance was launched in April 2017 and allows savers to pay for pension advice by accessing their pensions savings.
It was a central initiative of the Financial Advice Market Review - orchestrated by the Financial Conduct Authority and HM Treasury - designed to help more people get access to advice who may not have been able to afford to pay for it from their disposable income.
The Treasury had previously said it was the responsibility of the providers to market the allowance, but by May last year none of those asked by FTAdviser had any firm plans to do so, many citing a lack of demand.
FTAdviser also reported last year that it appeared the government had no data on how popular the allowance had been with consumers.
The Work and Pensions committee launched an inquiry into the cost of pension provision, including financial advice, at the beginning of August.
The review, which follows an earlier inquiry into the government's pension freedom and choice reforms, will examine whether enough is being done to ensure savers are offered value for money for their pension savings, understand what they are being charged and why, and understand the impact of costs on retirement outcomes.
Pimfa said, despite the cost, people who take advice were likely to accumulate more financial and pension wealth than others, supported by increased saving and investing in equity assets.
The trade body stated: "The design of tailored, individual pathways for savers, assessment of the sustainability of their pensions, and more broadly, the piece of mind that financial advice can bring means that where it is appropriate, regulated financial advice is preferable to the purchase of mass market default products."
Kay Ingram, director of public policy at national firm LEBC, has a similar opinion.
She told FTAdviser: "IFAs need to do more to make advice more accessible if good consumer outcomes are to be achieved."
Sir Steve Webb, director of policy at Royal London and former pensions minister, also responded to the inquiry.
In his submission, he pointed to research conducted by the International Longevity Centre and commissioned by Royal London last year, which showed those who received financial advice were on average £40,000 better off than those who did not.
He said: "We believe that this research objectively demonstrates that most people who take financial advice are satisfied with the experience and that on average it is significantly beneficial to them to do so."
Sir Steve argued despite several issues of late – including the pension transfers fiasco surrounding British Steel workers – the research showed the bigger picture had not changed. "In most cases financial advice is highly beneficial and good value for money," he said.
Craig Harrison, managing director of Creative Wealth Management, said: "It’s a very useful allowance although in my experience consumers generally aren’t aware of it.
"If the allowance were better promoted, there would undoubtedly be more take-up and providers would then have to offer it to remain competitive."
maria.espadinha@ft.com
