FT Adviser (26/03/2019) – Some 68 per cent of people accessing their pension are not using a financial adviser to help them plan for their retirement, research has shown.
According to research from Canada Life, which polled more than 500 over 55’s who have used the pension freedoms, two-thirds (66 per cent) of savers also didn’t shop around before buying a pension product – either annuity or drawdown – from their pension provider.
Introduced in April 2015, the pension freedom rules opened up the way savers could access their pension cash, leading to hike in drawdown sales in lieu of annuities.
The freedoms, which did not include defined benefit pensions, also led to an increase in transfers out of so-called ‘gold-plated’ retirement plans as people sought to get access to their cash.
Canada Life’s research, put together to mark the upcoming fourth anniversary of pension freedoms, also showed that two in five (40 per cent) consumers who accessed their pension for cash for the first time were still working.
Some 60 per cent of withdrawals were then invested in cash, while holidays, home improvements, and new cars were also popular uses.
Alan Chan, director and chartered financial planner at London-based IFS Wealth & Pensions, said buying an annuity or a drawdown product was one of the biggest decisions savers will ever make in their lives, “so it would be prudent to take professional advice to make sure they’re doing the right thing, as quite often it’s irreversible”.
He said: “It would be interesting to know if any of them at least used Pension Wise – my guess is also very few.”
Mr Chan also noted that the fact that 60 per cent of the cash withdrawals were subsequently reinvested in bank/savings accounts was “quite worrying”.
He said: “It makes little sense from a tax perspective and also, as we know, returns from cash savings are at their all-time low, so they run the risk of inflation eroding their capital over time.”
Full article link: https://www.ftadviser.com/pensions/2019/03/26/majority-of-savers-access-pensions-without-advice/