Why do retirees shun financial advice?
Friday, 27 May 2016 | 3 minutes reading time
Savers are loath to pay a financial adviser for help before accessing their pension pots, new research shows. Only one in five over-55s were willing to pay for advice, while 50% said they were not and 32% didn't know, according to a survey by comparison website money.co.uk.
Those that said 'no' gave a range of reasons, with some 59% saying they didn't feel the need to get help, while 28% thought it would be a waste of money and 27% couldn't afford it.
The lack of affordable and accessible money advice is about to come under scrutiny in a new Government review of the finance industry.
This will investigate the so-called 'advice gap', which leaves people with modest means out in the cold, and other barriers that currently put people off seeking help from financial professionals.
The review follows the Government's pension freedom reforms, which allow over-55s to unlock savings built up over decades and spend, save or invest them as they wish.
The shake-up has sparked concern that people are in more need than ever of decent financial advice to help them navigate the system, or they risk squandering their pension pots.
Over-55s are no longer required to buy unpopular and poor value annuities, which provide a guaranteed income for life. Instead, more are using income drawdown schemes previously restricted to the wealthy, but these are complicated and involve investment risk.
Among those who told money.co.uk they would not get advice, 15% said they wanted to access their money quickly without any hassle, and 20% said they would turn to the Government's free Pension Wise guidance service instead. Some 6% said they felt intimidated by financial advisers.
Of those who said they would pay for financial advice before accessing their retirement savings, 82% said it was because they wanted to get such a major financial decision right.
But money.co.uk found a big gap between what people were prepared to pay and the actual amount charged by finance professionals.
Its survey shows people were willing to pay an average of £253, yet the average cost of an initial financial review is around £500, while setting up an income drawdown scheme for a £300,000 pension fund can set you back £3,000.
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