Pension advice to make customers better off in retirement

Michelle Gribbin | 18/12/2020



Financial jargon can be a real stumbling block for people planning for retirement. As an impartial pension adviser, we are able to cut through the complexity of investments to help our consumers find the best place to invest their pension savings. When making recommendations, we look at over 40,000 different funds so that we can be certain our customers choose the right investments to suit their needs.

We do this by doing two key things which, based on our data and external analysis, makes people better off in retirement compared to if they had not taken pension advice. Sounds too good to be true? This is how we do it.

  1. Keeping platform and fund fees low.

Poorly-informed consumers are often paying excessive fees and charges to the benefit of inefficient incumbent pension providers.  This in turn erodes the potential value of a pension as it grows.  Annual platform and fund charges are on average £218 per year higher than our platform and fund options chosen from the whole of the market ( based on a £34,000 pension pot).  This equates to a £8,160  differential at retirement if invested over 20 years, assuming a gross 4% return* (1).

2. Making sure your asset allocation is correct and you are avoiding poorly rated funds.

Simply put, asset allocation relates to how much of your pension is invested in different types of assets, namely cash, bonds and equities (stocks and shares). When investing your pension your money is generally held in a mixture of bonds and equities, in proportion to the level of risk you are willing to take. Our data shows that nearly half (42%) of consumers are unknowingly invested in an asset allocation which is inconsistent with their individual retirement goals, appetite for risk and/or capacity for loss. For example, for someone who has a strong appetite for risk, but who has an under allocation in equities this will reduce expected long-term returns. Furthermore, money held in defined contribution pensions is frequently invested in underperforming funds, as rated by independent agencies such as Financial Express and Morningstar. By avoiding poorly rated fund managers and having the correct asset allocation, investment returns can increase by 3.1% per annum which equates to over £1000, or more than £28,000 over the lifetime of a pension (based on a £34,000 pension pot over 20 years)(1).

We analysed 14,000 funds across over 3,000 Profile Pension customers. Using this data, we’ve calculated that we’ve helped our customers achieve just over 3.7% extra return on their retirement savings per annum, once our fees have been taken into account (2) , when compared to if they had not taken our advice. More and more people are also now taking drawdown to take an income from their pension, whilst leaving the remainder of their savings invested. This effectively increases their investment time horizon, which in turn can increase the amount they have to live on in retirement. Get started now.

How do we calculate "better off in retirement"?

What does this mean in £££ for our typical customer?

A  customer with a pension value of  £34k and 20 years to go until retirement, could end up £35k better off taking our pension investment advice (1,2). 

So if you want to make sure your pensions are invested in the right way, spend 10 minutes today getting a free impartial investment recommendation and see how  you could be potentially £35k better off in retirement.

Capital at risk. The value of investments and the income derived from them, can go down as well as up and you could get back less than you originally invested. Past performance is not a guide to future performance. Funds may carry different levels of risk depending on the geographical region and industry sector in which they invest. You should ensure that you understand the nature of any fund before you invest in it.

For illustration purposes only, investment returns may be higher or lower than the figure shown.

(1) Profile Pensions’ Customer Better Off Analysis as at 11/12/2020. Analysis done on 3143 customers over the period from 20 April 2018 to 11 December 2020. Excluding With Profit pensions and loyalty bonuses.

(2) This is calculated using both the investment return and fee reduction, and includes Profile Pensions initial arrangement fee of 1% and all ongoing fees & charges.

Simply sign up online and we'll do all the hard work for you.