Pension provider Prudential has published a guide to help advisers understand the issues surrounding retirement advice.
The guide, published today (July 19), was written by Billy Burrows, retirement director at Better Retirement, on behalf of Prudential and encourages advisers to rethink their retirement advice processes to see whether they can achieve better outcomes for their clients.
In the guide Mr Burrows explained that retirement advice was complex because of the technical and behavioural factors involved.
He said advisers had to have a good understanding of technical matters such as how annuities and drawdown worked and the behavioural factors which may influence the advice process.
Mr Burrows said: "Two things happen as people journey through retirement. Firstly, the technical aspects of retirement become more complicated and secondly, the emotional and behavioural factors become more important.
"Therefore, it is important that advisers and their clients take both factors into consideration when making important decisions."
The guide discusses the advice gap and the retirement advice process as well as the cost of advice and the notion of providing value for money.
Mr Burrows said retirement advice was different to other types of advice, such as investments or mortgages, because of the many different pension options available and the need for long-term planning, alongside clients' often complex needs.
Mr Burrows said: "Investment advice for people with modest assets and uncomplicated circumstances is often a two-step process; the client explains what they want and completes a questionnaire and then the adviser uses their knowledge and judgement to recommend a solution.
"Retirement advice is more complicated and often involves additional steps because there are more factors and solutions to take into account.
"These extra steps include educating clients about their options and the key issues, encouraging them to think about their longer-term objectives and equipping them with the tools to compare and contrast the options presented to them."
The guide also includes a case study of an individual who is considering his retirement option as he reduces his workload, and demonstrates how he can take tax efficient income without taking undue risks.
Vince Smith-Hughes, retirement expert at Prudential, said: "All financial advice is important, and for many older people, advice at retirement is extremely important.
"Pension freedoms have transformed the way people access their pension pots at retirement, and many people fall into the trap of thinking it is easy and they can make retirement decisions without financial advice."
According to research from the Association of British Insurers, published last month (June), about a third (34 per cent) of the 62,000 savers who accessed their pensions via drawdown for the first time last year didn’t take financial advice.
The ABI also found drawdown pots were getting larger. At an average size of £120,000 this was the highest on record, while the proportion of customers reaching retirement with more than £250,000 also doubled in the space of just two years (to 11 per cent).