Drawdown retirees go it alone without advice

Grandfather Teaching Little Boy

Retirees using drawdown are three times more likely to use a financial adviser than Pension Wise when accessing their funds, however, many are still not taking any kind of advice or guidance, according to AJ Bell research.

The research found 34% of people went to see a financial adviser when entering drawdown compared to 12% who chose Pension Wise. However, the data also showed 40% of respondents did not seek any help whatsoever. 

AJ Bell said the research reinforces how important it is for the Financial Guidance and Claims Bill, which is due for its third reading in the House of Lords on 21 November, to find"effective measures" that increase the take up of the government's new single guidance body and get more people engaging with their pension decisions.

AJ Bell said ti wants further debate and scrutiny of the latest amendment to the Bill in the House of Lords. 

The amendment proposes making guidance mandatory"before accessing or transferring defined contribution, defined benefit or money purchase benefits".

Providers would have to ask customers"at the point at which they require access or a transfer of their pension assets" if they had received guidance. If the answer is ‘No', the provider would be required to"provide access to such information and guidance before proceeding".

AJ Bell senior analyst Tom Selby said:"There needs to be a mechanism to encourage more people to seek advice and guidance but the most recent amendment to the Bill needs further scrutiny.

"The majority of people who get to the point of accessing benefits have already made their mind up and want their cash straight away. Forcing them to take guidance at this stage is arguably too late."

He said late stage guidance would cause a delay in people accessing their money which"would undermine the fundamental principle that people aged over 55 now have the freedom to access their pension savings how and when they like".

He added:"If the government wants to ensure people take guidance it might be better for some kind of standard fact sheet on their retirement options and appointment card for the new guidance body to be provided to everyone well ahead of the point they want to access their benefits, say age 50.

"This should happen alongside a fundamental rethink of the way the regulator requires providers and advisers to communicate with customers, with a fresh focus on simplification and getting messages to savers effectively."

 

This article was written by Professional Adviser from Professional Adviser and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.