Whilst half of those questioned said they’d be confident choosing savings or insurance products without advice, just 16.6% said they’d feel comfortable choosing a pension product themselves. Only 12.7% said they’d be confident consolidating their pensions into one pot or transferring from one pension provider to another.
How advice affects your relationship with money
Not receiving financial advice can mean having a poorer relationship with money overall. Three quarters of those questioned who have sought help from an adviser said they have a good or very good relationship with money, compared to 58% of people who’ve never received financial advice.
A spokesman for Aegon said: “Despite people asserting they can manage decisions concerning spending, saving and investing money, the findings show a significant lack of confidence in making many of the more important financial decisions. When it comes to deciding a retirement date for instance, those people who had a financial adviser were far more confident about making a decision (54%) compared to those who didn’t seek advice (29%)."
Mental health and money are often linked too. Close Brothers Financial Wellbeing Index found that 94% of employees are suffering from money worries, whilst separate research for Gettasub found that 59% rank it as their biggest cause of stress and anxiety.
Barriers to advice
One of the biggest difficulties many people face when seeking pensions advice is that many advisers require savers to have a minimum pension pot of £50k to £100k, yet many people’s retirement savings are no where near this amount.
According to latest data from the Financial Conduct Authority (FCA) four in 10 pension pots (252,000) that were accessed in 2018/19 had a value of less than £10,000. Nearly nine in 10 of these were pots that were accessed for the first time and fully withdrawn. Nearly 90% had a value of less than £30,000 and 63% less than £10,000.
One study by Schroders conducted in 2017 found that more than half of all IFAs turned away clients with less than £50,000 to invest. Separate research by Deloitte showed that most large IFA firms and high street banks are channelling resources towards customers with at least £50,000 in investable assets. As a result, there could be as many as 5.5m disenfranchised customers who may not have access to financial advice.
Lots of people also think they won’t be able to afford financial advice, although it’s worth noting that there isn’t usually an upfront cost as if the advice is to do with a pension transfer (switching your pension to another provider), then any charges involved can be taken directly from your pension.
If you want advice that isn’t related to a pension transfer, you may be able to take some money from your pension to help cover the cost through the Pension Advice Allowance. This allows you to take up to £500 from your defined contribution pension up to three times in your lifetime to put towards the cost of retirement financial advice. You can find out more about how the Pension Advice Allowance works in our blog here.
The value of advice
Barriers to advice can have serious consequences for pension savers. Royal London, in conjunction with the International Longevity Centre recently looked at exactly how much financial advice is worth. It found that the benefits of financial advice are potentially greater for those who are ‘just getting buy’, with this group seeing an average 24% boost to their pension wealth following financial advice, compared to 11% for more affluent groups.
Across all groups, those who sought financial advice on their retirement savings saw their pension wealth rise by an average of a massive £30,991. Find out more about why advice matters in our blog on the benefits of pension advice.