Opinion  

Is the cost of retirement advice putting people off?

Simon Read

Simon Read

More people are realising they need financial advice, but very few are prepared to pay for it.

This view is confirmed by new research published last week by Money Minder, a Lincolnshire-based investment and pensions IFA. It focused on pre-retired people, aged between 55 and 67, who are not in a final salary or defined benefit pension scheme.

There are an estimated 3.1m people at this crucial age who need to make some important decisions. Many people are either scared to even think about their finances or presume there is no point. When I have talked to people in that age group, most have given little practical thought to their retirement.

Article continues after advert

Why? Anecdotally, there are a variety of reasons. Top of the tree seems to be the excuse: “I’ve been busy getting on with more important things, like life”.

But many people are either scared to even think about their finances or presume there is no point and things will sort themselves out.

However, Money Minder’s research reveals three-fifths of 55 to 67-year-olds are worried it will be difficult to make ends meet in retirement. Around half have no idea what they are going to do with their pension choices, but the majority say they simply will not pay for the advice they need.

Just over three-fifths say they are not prepared to pay for retirement planning advice. That is a worrying figure. Without getting decent advice, what will become of these people? Are they likely to make the wrong choices about their pension pot options? You bet.

That was made clear by the FCA’s Retirement Outcome Review final report, published last week. It reported that many people are making poor financial decisions by taking some of their pension pot in cash.

‘Clampdown’ on charges

Whose fault is that? The pension providers, according to an enraged Trade Union Congress.

Its pensions officer, Tim Sharp, said: “The report reveals a retirement income market that often overcharges and confuses people. We need a clampdown on rip-off charges.”

That is certainly something to consider, but that will not help people make the right retirement decisions. When it comes to drawdown, the FCA report concluded that someone who wants to draw from their pot over a 20-year period could increase their expected annual income by more than two-thirds (37 per cent) by investing in a mix of assets rather than just cash.

This may seem obvious to you, but it is not obvious to the many masses who remain a little fearful of investments and are likely to only focus on how much cash they can get their hands on.