Since the introduction of the pension reforms, retirees have much greater flexibility to spend and invest their pension pots as they wish. However, this means that people are faced with important decisions, both in the run-up to retirement and afterwards, that will affect their standard of living and financial outlook for years to come.
A recent report1 by Canada Life shows that only one in three retirees (32%) take professional advice from a financial adviser. This means that the majority (68%) may not be fully exploring their options and aren’t putting in place the best pension arrangements for their personal circumstances. Figures show that many simply take the annuity or drawdown facility that their existing provider offers them, as they aren’t aware that they can shop around to get a better deal.
Key reasons given for not seeking professional help in retirement planning included confidence that they knew what they were doing on their own; the size of the pension pot not being large enough to bother asking for advice; and the cost of advice.
The Financial Conduct Authority has reported concerns that those who don’t take advice may be in danger of making poor investment decisions, or simply withdrawing cash from their pension pot and putting it into low return cash funds where it will be eroded by inflation.
Andrew Tully, Technical Director at Canada Life, said:
“A significant majority of people exercising their pension freedoms have turned their back on financial advice. We’ve exposed some pretty entrenched views on the value of financial advice, but many people are seemingly making complex decisions and potentially irreversible financial decisions unaided.
“I’d like to turn the debate on its head. Rather than talk about the cost of advice, we should instead promote the idea that people can’t afford not to get advice. It can often be just as cost effective, or even better value paying for advice, than not.
“Advice is much more likely to create better consumer outcomes than trying to go it alone with a DIY retirement.”
Talking to an independent financial adviser can be a great help in planning for retirement.
1Canada Life, March 2019