PensionsOct 30 2020

Everyday life a 'barrier' to seeking advice, DWP finds

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Everyday life a 'barrier' to seeking advice, DWP finds

Savers feel as though they are too preoccupied with day to day life to be able to seek advice on their pensions, research has found.

A report from the Department for Work and Pensions on how savers' navigate decumulation, published this week (October 28), found many avoid seeking both advice and guidance because they do not want the stress, anxiety or burden of going through the process.

This could be because they are living with health conditions or dealing with other stressful situations, such as divorce.

But others said simple day to day tasks, such as work or caring responsibilities, left them little time to consider their options.

Billy Burrows, retirement director at Better Retirement Group, urged people to try and find the time, warning it was difficult to make the right decision without support.

He said: “It is a question of priorities. For many people their pension pot will be one of their largest financial assets and so they owe it to themselves and to their family to make sure they make the right decisions.

“Advice may appear complex and expensive but it doesn't have to be as advisers have it within their control to provide advice that is client friendly and cost-effective while at the same time being fully compliant.”

Mr Burrows added: “It is easy to make mistakes which cannot be subsequently rectified and there is the mistaken belief that people can make their own decisions and get good outcomes.

“Converting a pension pot into cash and income is one of the most complicated decisions in personal finance so it requires a qualified and experienced adviser to help people make the right choices.”

Meanwhile, Tom Selby, senior analyst at AJBell, said one of the key benefits of advice was that savers can pass the burden on to someone else.

He said: “Things like video conferencing are already helping advisers deliver services to clients in a time-efficient manner, and I suspect the use of such services has increased substantially during lockdown.

“But it is important the whole sector tackles the perception held by some that advice is somehow an administrative burden. On the contrary, advice is not only a sound investment but also allows you more time to do things you love.”

Steve Webb, partner at LCP, said the country needed to embed taking advice and guidance into its culture.

He said: “Growing numbers of people will reach retirement with modest pension pots and will need more help knowing how to make the best use of them.   

“For those with smaller pots, paid-for advice may never be cost-effective for the saver or the adviser. But for those with slightly larger pots, the offer of fixed-fee advice, being clear what they will get for their money, may help to reduce barriers, especially if it does not need to involve a face-to-face appointment”.

Other barriers

The report also found savers decided against taking advice due to them not trusting advisers. 

One respondent said: “They’re going to push you down a road which is going to gain them rather than you […] They’re just trying to make money from anybody and just say, ‘Well, do this,’ and it’s not the best thing for me, it’s not the right thing for me.”

There were also concerns that an adviser would pass on personal information without consent.

Some individuals said advisers would go along with what they suggested rather than challenge it and they could often feel pressured to take out products, such as annuities, that could earn their adviser a commission.

Some of the respondents even suspected their adviser of malpractice.

One respondent said: “I had a bad experience. I gave my information to a company, and the person who took it then left, went to another company and tried to contact me from the new company.”

However, those who did see an adviser said they “felt their knowledge and expertise made them a trusted source of advice” and that their trust grew once they had formed an ongoing relationship.

Last week (October 21), research from Interactive Investor found only 4 per cent of people regretted not seeking financial advice on their pension, with some saying they had been ‘ripped off’ in the past.

In particular, respondents stated “rip off cost of advice”, “poor advice from IFA” and “paying for poor professional advice” as their main financial regrets.

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