Free Pension Guidance Needs Improving, Say Over 55s

By Retirement

Most retirement savers believe free pension guidance is of no use, while many do not bother to ask for help with their financial choices.

Only one in four over 55s rated talking to The Pension Advisory Service worthwhile, while only one in six found guidance from the free Pension Wise service helped them.

The research by financial firm MetLife also found 40% of over 55s do not bother with asking anyone for advice about planning their retirement finances.

New pensions minister Guy Opperman is considering merging TPAs, Pension Wise and The Money Advice Service into one organisation.

Compulsory pension guidance

Pension rules demand that anyone must take independent financial advice by law if they have a:

  • final salary or career average pension – also called a ‘defined benefit’ pension – worth more than £30,000 and want to transfer the money to a defined contribution pension
  • defined contribution pension worth more than £30,000 with a guarantee about what will be paid on retirement that they want to give up to do something else with the money

Speaking to a free guidance service counts as taking advice under current pension rules.

The over-55s also told MetLife the guidance services are not providing the information they need and that although pension freedoms introduced in April 2015 improved their financial options on retirement, more innovation is needed to smooth some unforeseen consequences of the new rules.

Almost half (47%) of over 55s are concerned that they pay too much tax under pension freedoms and more than seven out of 10 want more options for spending and investing their retirement incomes.

Worries over tax on pensions

Simon Massey, Wealth Management Director at MetLife UK, said: “The issues that worry consumers the most include minimising tax bills and ensuring that their money does not run out in retirement.

“The concern for savers relying on drawdown is that funds and income can reduce because of investment market volatility or overspending which is where guidance and advice can provide vital support.

“The new Pensions Minister has a wide range of issues to tackle but top of the agenda should be providing a guidance service which can build on the successes of the past two years and help deliver real pension freedom.”

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