More recently, the ABI revealed their research** showing only one-third of retirement savers who are utilising new pension freedoms in order to access their pension savings are taking independent financial advice before doing so. This should be a cause for significant concern as, alongside real estate property, a pension is often the most valuable asset owned by the over 55s.
In an official ABI press release, the organisation’s Director of Long-Terms Savings Policy, Yvonne Braun, commented, “Pension freedoms gave consumers many more options and flexibility in their retirement, but with greater choice comes greater risks. To see levels of advice hitting new lows is disturbing and risks leaving thousands of elderly consumers facing poverty later on in their retirement.” ***
Braun went on to say that new problems require new solutions, and the ABI sees the empowerment of consumers to make the right decisions as a priority. Hence, the ABI has published two documents focused on raising awareness: awareness of pre-retirement risk warnings at certain ages and communication techniques for employers and pension providers
Saving on financial advice likely to prove a false economy
The ABI found that around 62,000 savers withdrew cash (via drawdown) from their pensions for the first time during a six-month period in 2018; however, given that 34%** did this without taking any financial advice many of these consumers could unwittingly be jeopardising their retirement plans.
It is thought that a large proportion of pension savers forego advice because of a perception that it might prove prohibitively costly. This is likely to prove a false economy. The ABI reports that the average pension pot size reached a record high last year of £120,000**; if savers are to ensure they have sufficient cash flow in retirement, they are likely to be best-served by ensuring they have the guidance of a regulated and independent financial adviser in relation to the management of their pension fund.
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* FCA FAMR interim consumer research report https://www.fca.org.uk/publication/research/famr-interim-consumer-research-report-2018.pdf Accessed 14-06-19
**Analysis based on ABI six-monthly retirement income data collected from members.
*** https://www.abi.org.uk/news/news-articles/2019/05/tens-of-thousands-entering-retirement-without-ever-taking-advice-each-year-abi-warns/ Accessed 14/06/19