One year on from the start of the pension freedoms, research from LV= reveals that while many people are keen to use the new flexibilities, large numbers are still not planning to get help to make the most of their money.
LV= has found three in ten (31%) of those aged over 50 plan to take, or already have taken, a lump sum from their pension. This increases to 47% of those who will retire in the next five years.
Nearly half (46%) plan to save the lump sum or reinvest it, while other popular options are using it for home improvements (23%), day-to-day living costs (19%), and paying off debts (18%).
Deciding what to do with pension savings to make them last throughout retirement is a complex decision, however many aren’t getting advice to help with this difficult choice. Four in ten (41%) of those within five years of retirement don’t plan to take any advice or guidance at all. Only one in five (21%) will take regulated advice, while just 14% will use Pension Wise.
The main reasons why people don’t want to, or haven’t, used a financial adviser are lack of trust (23%), thinking that free guidance is sufficient (22%) and the cost (20%).
There is also a lack of awareness of the value of advice. Of those that have already retired and didn’t take advice, only one in ten (10%) think taking financial advice would have helped them make their money last longer or get a better deal. Yet, there are clear benefits to taking advice and shopping around - those who shop around for an annuity get, on average, 23% more.1
LV= believes that the large numbers of people not taking advice could lead to a ‘mis-buying’ scandal. The Financial Advice Market Review has recognised the need to address the advice gap and made 28 recommendations on how to do this. However these reforms must be introduced without delay to ensure people can start benefiting as soon as possible.
Richard Rowney, Managing Director of Life and Pensions at LV=, said: “Deciding what to do with pension savings can be overwhelming so it’s extremely worrying that so few people plan to take advice or guidance when they retire. The Financial Advice Market Review recommendations will help address the advice gap, but it’s now crucial the Government and regulator don’t drag their heels in making these reforms a reality. They must work closely with the industry to increase trust and improve access to affordable, regulated advice without delay, otherwise we risk a ‘mis-buying’ scandal.”