Are you one of the tens of thousands of people failing to seek advice before retirement each year?
New analysis from the Association of British Insurers (ABI) shows very low levels of retirement readiness. It found that more than 62,000 people accessed some of their pension via drawdown for the first time during a six-month period last year, but 34% haven’t taken any form of financial advice. This worrying trend is echoed by the Financial Conduct Authority (FCA) who found that 91% of UK adults did not receive any financial advice in a 12-month period.
Scott Herbert, Independent Financial Advisor and Partner of Clarke Nicklin Financial Planning considers newly published research on the pensions advisory market:
It is widely considered that financial advice is out of reach for most, which may explain why 21,000 people accessing a record-average pot size of £120,000 did so without ever having spoken to a financial adviser.
By doing so though, thousands of retirees each month run the risk of making dangerous decisions with the large sums of cash they suddenly have access to, which could eventually lead to them running out of money too early.
The pension industry has an important role to play in highlighting matters to customers. This has prompted the ABI to publish new guidance documents. These documents recommend that customers receive three different forms of risk warnings at ages 50, then 55 to 70, and then at age 75. The different warnings cover scams and contributions for the younger groups, and then tax, life expectancy and power of attorney risks for the older groups – for example.
They further focus on the opportunities during different stages of a customer’s life, highlighting the need to speak to 18-25-year olds differently to other age groups, in the same way that adults in their 50s will need to receive different messages as they draw closer to their retirement.
“The risk warnings included in documents from pension companies should prove to be a useful part of highlighting to individuals the need to think about their situation. However, the real key to making a difference in the market is for individuals to get personal, tailored advice on an ongoing basis.
“It is wrongly construed that good financial advice is out of reach. We look after a diverse range of clients, advising them from the early stages of retirement planning through retirement and well beyond. Whether the potential retirement pots are likely to be modest or large sums, the ongoing, regular advice and support we provide is value for money due to the benefits obtained from the advice.
“I believe the way of solving the problem of the lack of “retirement readiness” is definitely having a strong relationship with a financial advisor who understands you, and who undertakes regular ongoing reviews and provides advice to ensure your planning is the best it can be for your circumstances.”