Many of us will pay into one or more pensions over several decades, so it can be tempting to stick our pension paperwork in a drawer and forget about it. However, getting regular pension advice has several important benefits, not least helping ensure that you take the right level of risk for your age and circumstances, and that you are not paying more than you need to in pension charges.
Despite this, lots of people find it daunting seeking pension advice, and often either just hope for the best, or opt to take a DIY approach. However, for those taking the latter route, according to research by pension provider Aegon, half of 2,000 consumers it questioned last year said that they were confident choosing savings and general insurance products, compared to only around one in 10 who said they felt comfortable making more complex decisions about savings and investments*.
The other main reason people don’t seek pension advice is because they think they cannot afford it. It’s worth noting, though, that there is not usually an upfront fee and even though you will have to pay for it, hopefully the advice you receive will leave you much better off in retirement. For example, according to a report looking at the value of pension advice by Unbiased.co.uk, the trade body for pension advisers, those who took advice on their pensions at the age of 25 saved an average of £34,300 more than those who did not. This figure does not include tax relief or interest.**
Understand the difference between pension advice and guidance
If you are aged 55 or above and only need general information about your options when it comes to using your retirement savings to provide you with an income, the Government’s Pension Wise service can provide you with free guidance. However, if you want recommendations that are specifically for you, you will need help from a professional pension adviser.
Although you will have to pay for a professional adviser to check your pension, don’t underestimate the financial impact it can have. The average UK consumer who takes financial advice will increase their wealth by £30,991, according to research by the International Longevity Centre***. Its data also shows that those who have an ongoing relationship with a pension adviser tend to have better financial outcomes, ending up with nearly 50 per cent higher average pension wealth*** than those who only received advice at the start.
How pension advice can help
A pension adviser can let you know if your pension is in the right place for you taking into consideration your personal circumstances. More than half (55 per cent) of customers’ pensions that Profile Pensions reviewed between October and December 2019**** were in investments that were not appropriate for them, so this is a common problem.
Many people have several types of pension schemes which can make them difficult to keep track of. Providing transferring them will not result in you losing any valuable benefits, and exit charges will not eat into your retirement savings, an adviser may recommend consolidating your pensions to make them easier to manage. You may also be able to reduce the charges you are paying by moving your pensions to a different plan, which could have a significant impact on the value of your retirement savings over the long term.
Another benefit of pension advice is that you will be able to discuss your options at retirement with your adviser. They will also make sure that you are in a good pension pot that puts you in control of how you would like to withdraw from it when you reach retirement. Being in the right pension can result in you having more money to retire with, making sure you have a better retirement. All these benefits can provide you with valuable peace of mind that you will hopefully be able to enjoy the retirement you want, without having to worry whether you will be able to afford to make ends meet.
Deciphering pension jargon
There’s no escaping the fact that pensions can be complicated. Not only is there plenty of jargon to get to grips with, but there are also all sorts of different rules you will need to abide by if you want to avoid any potentially hefty tax bills.
A good pension adviser should keep things straightforward and easy to understand, talking you through all the pension options available to you in plain English. This can make you feel much more confident about your financial future and make saving for retirement seem a whole lot less daunting.
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Capital at risk. Past performance is not a guide to future performance. This website does not constitute personal advice. If you are in doubt as to the suitability of an investment, please contact one of Profile Pensions’ advisers. Prevailing tax rates and reliefs are dependent on your individual circumstances and are subject to change.
Telegraph Media Group Limited is an Introducer Appointed Representative of Profile Pensions, a trading name of Profile Financial Solutions Limited, which is authorised and regulated by the Financial Conduct Authority. FCA Number 596398. Registered in England & Wales, Company Number 07731925. Registered Office address: Norwest Court, Guildhall Street, Preston PR1 3NU.
*Data source: Aegon
**** 942 pensions reviewed between October-December 2019
Information correct at date of publication.