Retirees may not take up the offer of guidance announced in the Budget, according to MGM Advantage, as research reveals that the over 55s do not value expert advice and believe they can manage their financial affairs by themselves.
The retirement income specialist is warning that, in the customer’s best interests, the guidance guarantee process will need to be clearly signposted and consideration given to some form of compulsion to ensure good customer outcomes.
Andrew Tully, pensions technical director at MGM Advantage, said: “The guidance guarantee is a crucial piece of the Budget jigsaw. Just as your choices at retirement increase, so those decisions become more complex. Given the need for proper financial advice is even more important after the Budget proposals, it is extremely concerning that so many people do not value it and believe they are able to make decisions about how to best finance their retirement by themselves. If people do not seek expert help when considering their options for retirement, we could see many people making poor choices, such as paying too much tax, or investing in poor value solutions.
“We need to think about the lessons learnt from auto-enrolment, as there we have a form of soft compulsion to save. Perhaps similar prompts to use the guidance service should be considered, to ensure most people have a basic level of understanding of the myriad of options which are likely to become available before making any decisions.”
One in three (33%) UK adults aged 55+ and not yet retired say they would not value financial advice when retiring at all, with this rising to 38% of those with household incomes under £30,000. Almost two in five (38%) of all UK adults aged 55+ have never sought advice about retirement finance options. Of these, just under a third (31%) say they are confident enough to plan their own affairs, while one in ten (12%) say they don’t want to talk to anyone else because their financial affairs are private. Those with household incomes under £30,000 are much less likely to seek advice than their richer counterparts, with almost half (45%) trusting their own judgement compared to just a quarter (25%) of those with incomes of £30k or more.
In addition, two fifths of those aged 55+ (41%) say they are not aware of the different products and options available to them to generate retirement income, with this rising to 45% of those with household incomes of under £30k, and almost half (48%) of women.
The research also reveals that almost half of those aged 55+ (44%) believe they do not need an independent financial adviser (IFA), while more than a third (36%) do not know what one is. Men are more likely than women to believe they don’t need an IFA (47% compared to 42%) while women are more likely to be unsure what an IFA is (41% compared to 31% of men).
When asked which sources they have used for advice about retirement finance options, a fifth of respondents (20%) said internet websites, while over a sixth (18%) trusted their pension provider and the same proportion have consulted their family. A quarter (25%) said they had used an IFA. Men are more likely than women to use the internet (24% compared to 17%) while women are more likely to ask family (22% compared to 13% for men).
