MPs have been warned there will be a retirement crisis if the benefits of taking financial advice are not promoted.
As part of a House of Commons debate on the future of pensions policy last week, Rob Roberts, MP for Delyn in North Wales, warned the UK could reach a retirement crisis in 20-40 years time if savers’ attitude to advice did not change.
Mr Roberts, a former financial adviser, said widespread advice and education regarding pensions and retirement were “urgently needed” if people were to have a comfortable retirement.
He added: “In the past, these types of financial decisions and risks were shouldered by employers, pension providers and life insurance companies.
“Now, however, with the introduction of greater flexibility and freedom to the pensions marketplace, it is increasingly down to the individual to decide these matters, which is a wonderful thing in some respects, but worrying in others.
“We should not really place all responsibility for such important decisions on to people themselves. Instead, we should ensure that people feel supported and know where to turn for help and advice.”
Financial advice is often viewed as too expensive, or savers worry they do not have enough money to invest to warrant taking it.
But Mr Roberts said these “outdated perceptions” of the sector need to change.
One way to do this would be to make the sector more transparent and to move towards set fees on an hourly rate, or towards a project fee basis, he said.
“There is a large amount of worry and mistrust around the financial services industry", Mr Roberts said.
“It would certainly help boost consumers’ trust and confidence that they were getting the right advice if the advice sector were made more transparent.
“The inherent unfairness of percentage-based charging is clear. It is simply wrong to charge double the fee for handling a £200,000 investment compared with a £100,000 investment; it literally takes no more time and no more resource to do the work.”
He went on to say that savers should actively seek out advisers who charge fees which are expressed in pounds and pence.
In its review of the advice market post Retail Distribution Review and the Financial Advice Market Review, published earlier this month, the regulator found more than 80 per cent of ongoing holistic advice services had adviser charges set at only three price points - 0.5 per cent, 0.75 per cent and 1 per cent.
It found that ongoing services with a 1 per cent annual adviser charge did not have noticeably different features to those charging 0.5 per cent annually.
This was also the case for one-off advice.
The City watchdog warned these charges were not explained by "economies of scale", with little indication firms with more clients, or more affluent clients, had lower charges.
Having been a financial planner before becoming an MP, Mr Roberts said the “vast majority” of advisers will treat someone’s £30,000 pension pot with the same care and diligence as someone’s £300,000 pot.