Retirement savers and investors are shunning financial advice, according to the latest official data.
One in three pension savers are making financial decisions without taking professional advice, according to trade body the Association of British Insurers (ABI), while the Financial Conduct authority confirmed 91% of adults managed their money without taking any financial advice for at least 12 months.
The only gleam of hope for insurers was that a third of the 62,000 pension savers who drew down on their pension for the first time between April and September last year spoke to the free Pension Wise service.
The ABI argues that professional financial advice is too costly for most retirement savers, even though pension pots have reached a new average high of £120,000 – double the average in 2016.
New problems need new solutions
But not speaking to an IFA or other finance professional could lead savers to make ‘dangerous decisions’ about their retirement cash and end with them running out of money too soon.
The ABI’s Director of Long-Terms Savings Policy, Yvonne Braun said: “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 in their retirement.
“New problems require new solutions, and empowering consumers to make the right decisions for them is our priority at the ABI which is why we are publishing new proposals on how to communicate with customers today.”
Although the £120,000 average pot is the highest pension total on record, the number of savers with funds of £250,000 has doubled to 11% in two years.
The ABI wants pension providers to offer savers targeted documents to explain their financial options in retirement.
The ABI’s head of Long-Term Savings Policy Rob Yuille said: “The days when nearly everyone got a guaranteed income with their pension savings seem like a distant memory. There’s now a need for a more tailored approach to the communications we send to customers to ensure that they’re aware of and informed about the new risks and opportunities that our evolving retirement ecosystem presents.
“It’s great that people are reaching retirement with greater amounts stashed away in their nest eggs, but we have to make sure that they’re armed with the information they need to make smart decisions about how to use it in the run up to, and during their retirement.”