Priced Out Of Financial Advice For Pensions?

1 October 2015

A YouGov survey on behalf of the Citizens Advice Bureau has revealed some interesting statistics about pensions advice in the UK, especially in relation to people's attitudes and access to it. The survey questioned over 2000 adults in the UK about their attitude to taking qualified, independent advice on what to do with a private pension pot with a value of £61,000. The results were as follows:

  • 47% of respondents would be willing to pay some sort of fee
  • 29% would pay up to £200 in fees
  • 16% would pay between £200 and £1000 in fees
  • 2% would pay over £1000 in fees for advice
  • 30% would not be willing to part with any money for advice on their pension

On the face of it these figures seem quite positive, with a reasonably large number of people being willing to pay for professional advice on pensions. However, the survey also questioned IFAs (Independent Financial Advisors) on what would be their fee for such advice, and the resulting average quotes came back at £1490 for such a scenario as outlined in the survey. At this price, this means that just 2% of people would be willing to pay for advice on what to do with their pension.

Chief Executive of the Citizens Advice Bureau said:

"The market needs to adapt to those without a big budget for financial advice. In light of the pension reforms it is clear that people want advice about how best to use their retirement savings. But many are falling foul of the price gap, as they are unwilling or unable to pay what can equate to an entire month's salary in order to get advice."

The need for qualified, independent financial advice on pensions is perhaps more important now than ever Since the launch of the government's new pension freedoms earlier this year, people are now free to do what they wish with their pension pot. Before, they were limited to taking out an annuity, but now there are a whole host of options available, including ISAs, savings accounts, income drawdown plans, shares, bonds or simply spending the money. With all these (and more) options available to them, it's crucial that people make the right decision about what to do with their pension pot, because as a result of the new pensions freedoms, there has been a big rise in pension scams, often relieving people of their entire retirement savings.

There seems to be a huge market for independent financial advice at a reasonable rate that the majority of IFAs haven't tapped into yet. With people on limited budgets unwilling to spend what could be a whole month's salary on advice what to do with their pension pot, there lies a big opportunity for advisors who can offer advice, products and services at a more reasonable level. Unless this gap is filled, many people may remain priced out of pensions advice.

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