The importance of bridging the advice gap
Over thirty years, the retirement finance industry has seen a lot of changes; most notably, the way in which saver approach their pensions.
In 1993, the leading international actuarial firm, LCP reported that “virtually all” FTSE 100 companies offered defined benefit (or final salary) pensions. Today, however, such generous pensions are a rarity.
Today, they have largely been replaced by defined contribution style workplace pension schemes. The onus of preparing for one’s retirement no longer sits solely with employers; individuals are now expected to contribute to their financial futures.
Unsurprisingly, such a shift has changed the way in which people manage with their finances. Previously, with defined benefit pensions guaranteed, little employee engagement was required. However today, consumers are more involved with their retirement finances than ever before.
A new breed of consumer
Advancements in technology has propelled consumer engagement even further. Indeed, the internet and tech devices such as laptops and smartphones have made it incredibly easy for consumers to manage their retirement finances. From tracking their pension investments, to searching the market for alternative retirement finance options, savers have access to more information than ever before.
Although, it was the arrival of the pension freedoms in 2015, which spurred the most dramatic change in consumer behaviour. Never before had people been granted such control over their pension pot. From the age of 55, consumers had the ability to withdraw all of their pension if they wished to and spend it however they liked. The freedoms completely disrupted the retirement finance industry. Retirees were able to look beyond the “one-size-fits-all” approach to retirement and investigate more flexible retirement income options.
Of course, consumers having greater control over their own retirement savings is a positive step; in theory, it allows them to decide how best to plan their retirement. That said, there seems to be a growing issue when it comes to seeking financial advice.
Mind the advice gap…
Despite consumers becoming more engaged in their retirement finances, there seems to be a growing gap when it comes to seeking advice when making a major pension-related decision. Indeed, our own research has revealed that just 11% of UK adults have sought advice from an independent financial adviser; worryingly, almost two thirds (64%) of adults have never sought any form of financial advice.
The FCA’s latest retirement market data drew further attention to this, revealing that the number of adults taking regulated advice when entering flexible access drawdown – a retirement option which allows retirees to access their pension savings whenever they decide to – fell from 66,400 in April to September 2019 to 59,784 in the half year to March 2020; this is a decrease of 10%.
These figures are concerning; particularly within the context of the coronavirus pandemic and economic volatility. They suggest that consumers are panicking and, rather than taking a step back and seeking balanced, informed financial advice, they are rushing to make snap decisions.
Easing Pension Panic
The panic is understandable. After all, the onset of COVID-19 has caused an upheaval of many consumers’ personal finances; and those over the age of 55 will likely be looking to access their pension to ease immediate cash-flow issues. However, taking the time to seek financial advice could provide a lifeline in the long term.
And this is where My Pension Expert can step in. We obliterate the myth that investigating retirement finance options is a time consuming and expensive endeavour.
Our team of highly qualified independent financial advisers take into account all aspects of an individual’s financial situation and advise them on the best route to suit their specific needs.
What’s more, we do all the leg work for our clients – our team searches the entire retirement finance market to ensure that we can secure the best deals; whether it’s a better annuity rate, or a pension provider that better suits a clients’ risk appetite. Rather than leaving consumers to make a major decision on their own accord, we empower consumers, explaining all the options available to them, so they can find the route to retirement that best suits their needs.
A lot has changed in the financial services industry, and this rapid pace of transformation looks set to continue for the years to come. Indeed, consumer engagement in retirement will almost certainly increase in the years to come.
That said, consumers should never feel pressured to rush into snap, ill-advised decisions that could harm their financial futures. My Pension Expert is ready and waiting to help guide consumers to the retirement they deserve.