Stock market volatility and fraud are the most likely factors that could impact customers’ confidence in pension freedoms, a poll of financial advisers has revealed.
According to research from Prudential, the risk of scams and market instability were both cited by one fifth of financial advisers as reasons consumers might think twice about taking advantage of the increased financial options open to them.
The introduction of greater pension freedoms from April 2015 has meant that retirees have more choice over how they use their life savings for their retirement. The Pension Schemes Act put in place safeguards such as Pensionwise, a free pensions guidance service, and a requirement, in some cases, for people to obtain independent financial advice. However, the additional options and safeguards don’t easily solve the concerns many financial advisers are faced with.
Clients’ underestimation of their potential longevity was a worry raised by nearly half of advisers, and the same proportion also reported being unable to offer advice because the funds available to invest were too small. While some firms did not have a minimum amount to advise on, the average fund size reported through the research was around £59,000.
Advisers see the most common problems among their clients are having not sought advice early enough and not saving enough. Added to that, some of those clients who have invested, have done so in products in which they have a poor understanding.
Choosing good advice
Prudential’s retirement income expert, Vince Smith-Hughes, recommends those with smaller pension pots should turn to Pensionwise first, where they can be helped to understand their options in a free consultation.
Should further independent financial advice be necessary, a regulated, qualified and experienced consultant, backed up by specialised software for financial advisers, available from providers like https://www.intelliflo.com/, will deliver high quality advice, and avoid the potential for fraud and bad investments.
The message from the research to customers is clear – it is better to act sooner rather than later. Contact Pensionwise to assess your options, and if necessary, engage a regulated independent financial adviser to help start growing your pension pot as early as possible.
Smith-Hughes points out that the Pensions Advisory Service has good information on identifying and avoiding scams, including a tool that can show up situations where a scam might be about to happen.