Staying on top of their financial affairs has become more difficult for consumers over the last few years with the introduction of UK government changes like pension freedoms, which means the need of advice is greater than ever.
But, according to a Canada Life survey, only 32% of UK consumers over 55 sought financial advice before accessing their pensions.
“It is undoubtedly the case that people do not appreciate the potential value of financial advice,” Steve Webb, director of policy at Royal London, told International Adviser. “For people with meaningful pensions pots, we need to see greater take-up of advice not just at the point of retirement but also through a retirement, which can easily last for several decades.”
Ian Browne, pensions expert at Quilter, also told IA: “Importantly, the first step on the road to making people realise how important financial advice is, is boosting people’s engagement with their pensions.
“Doing this will subsequently lead to them realising that seeking help is likely the best course of action when entering into drawdown, as they will understand quite how many potential pitfalls there are and the ramifications of making a wrong move.”
DIY financial advice
Canada Life surveyed 505 people over the age of 55 and found 44% said they have enough confidence in what they were doing to not go to an adviser.
The size of the pension also has a role to play in deciding whether to consider advice, with one in four people (26%) saying their pension pot wasn’t big enough to need advice.
Some 22% of respondents were also put off by the cost.
Trust remains a barrier for one in five people (20%).
“People might be put off by the cost of advice; however, they should really be thinking about how much money they can save by taking financial advice,” said Browne. “For example, would you pay £500 for advice if it saved you £1,000 in tax?”
Webb added: “It is understandable that those with relatively small pension pots decide that the cost of taking full financial advice would eat up too much of their modest pension pot.
“But there is a big danger of over-confidence, with people failing to realise the implications of their choices, not least with regarding to the tax consequences of large withdrawals.”
