And worryingly, 35% of pension holders know nothing about how stock market falls can affect retirement savings.
Of those surveyed:
- 34% commented they don’t know how to ensure that they will not run the money in retirement.
- Half of the people with a pension of over £100,000 didn’t know a good amount about how to take money from their pension in a tax efficient way.
- 34% of my people understand how to ensure their spouse will be left with enough pension if they die.
- Although people are unclear about their options, many are not considering taking professional advice.
- Only 39% of pension holders are planning on taking financial advice when they retire.
- 31% are planning a do it yourself retirement.
- Only half of mass affluent people, that is, those with assets of between £100,000 and £500,000 (excluding property) are planning to take professional financial advice.
I find this staggering because the implications of getting this wrong is massive.
The top occasions where mass affluent consumers feel that people should seek professional advice are choosing to invest a large lump sum, or inheritance tax planning and deciding how to access a pension.
People have a series of big decisions to make as they approach the end of their working life and each one can make a huge difference to their retirement. For example,
Should you draw your pension down in one go or over a period of time?
Should you take your 25% tax-free cash or leave the money in your pension to grow?
Should you buy an annuity to guarantee an income for the rest of your life or go for drawdown?
These are just a few of the questions your professional financial advisor will be able to help you with.
Obtaining advice compensates for the emotional biases people have when they make big financial decisions. A do it yourself approach to managing large pension funds at retirement is fraught with risk.
People can easily buy the wrong products, incur unnecessary tax bills, or simply exhaust retirement funds too quickly.
Whereas an advisor will provide an impartial cool-headed approach to their clients finances and offer solutions that the client will not even have considered.