Obtaining Professional Advice on Pensions and Retirement

Obtaining Professional Advice on Pensions and Retirement

by Rebecca Hall on 31 Mar, 2011

When someone retires they are faced with some of the most difficult investment and financial management decisions that they will have ever faced. Yet only a staggering 44% of 55-64 year olds have ever sought advice on retirement planning. Defaqto (the data research company) hope to change this.

In a study titled the Annuity Review, Defaqto looked at both the behaviour of future retirees and also the knowledge of their advisers with a view to improving the services offered for retirees.

Today’s market was broadly found to be lacking an awareness of the key industry initiatives and regulatory developments. Defaqto hopes that their report will reverse that, offering up an up to date discussion of the pensions and annuity market alongside a breakdown of the current products available to the 55-64 age group. The result, thinks Matt Ward, a wealth management consultant at Defaqto, will be an increasingly cost-effective retirement planning advice strategy that will be passed on to clients.

The report also aimed to help advisers improve their information gathering process by identifying areas which a client must be asked about before adequate advice can be provided. Such areas included salary planning, pension choice, risk exposure and management, realistic planning of retirement life stages and day to day financial management.

A move to a more standards driven approach in terms of pensions advising is key following the damage done to many pension schemes by the financial crisis of the last few years. For some whose retirement was linked to success of the indexes or that of certain banks, there is a real challenge to make do with what they have, after seeing their forecasted annual income in retirement fall by up to 40%.

The crisis also compounded broader trends in pensions such as the increasing scarcity of final salary and defined benefit schemes alongside annuity rates which sit at a very low level.

Combined, these short and medium term factors place customers ever more in the hands of professional advisers. Yet it is not only customers who need the industry to reform. There are also sizeable advantages for firms able to offer advice to those approaching retirement.

In terms of customer base, between now and 2012, over 12 million people will retire in the UK and should go on to live far longer than their predecessors. Such a demographic shift simply cannot be ignored as a revenue stream. Firms can also note that the current lack of penetration by any one firm into the retirement and annuity business  provides a good incentive for advisers to seek out clients and build a position in a constantly in-demand market. And competition of that nature should lead to a better deal for clients.

As a result of the information the Defaqto report provides to IFAs and also its ability to market the pensions sector to firms, the Annuity Review represents a substantial should genuinely aid those who are seeking to secure their retirement as well as a helpful guide for IFAs looking to increase their market share.

About the Author

Rebecca Hall


Rebecca Hall worked as an independent mortgage adviser for 10 years before turning to financial journalism full time. She has strong links to the CAB advising families on mortgage refinancing.