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Canada Life: 68% of clients access pensions without an adviser

Sixty-eight per cent of people who are accessing their pension are not currently using a financial adviser says provider Canada Life.

The finding is from a study based on research done in March by Opinium among 505 respondents aged over 55 who have accessed their pensions from April 2015.

It sheds light on how people are using pension freedoms and the role of advisers in their decision making.

The study shows two-thirds did not shop around before buying either an annuity or selecting drawdown from their pension provider.

Also, 92 per cent of consumers say they knew they would be taxed on withdrawals above the tax-free threshold while 87 per cent say they knew what that tax payment would be.

The provider found two in five, or 40 per cent, of consumers accessing their pension for cash for the first time were still working and nearly one in four continue to pay into a pension having flexibly accessed at least one pension while leaving the rest invested.

Canada Life technical director Andrew Tully says: “The lack of shopping around continues unchecked. A significant majority are simply taking the easy route and sticking with what or who they know when looking at an annuity or a drawdown product.

“This could simply be driven by easy and swift access to tax-free cash, the obvious lack of engagement with a financial adviser or simply overconfidence and lack of awareness of the options available.

“We know people are increasingly accessing their pensions before planned retirement ages, and there are implications for the one in four people who say they are continuing to pay into a pension.”

He adds: “The strict HM Revenue and Customs annual limit of £4,000 called the money purchase annual allowance could be the sting in the tail that catches the unwary out further down the line.

“Interestingly, only one in 10 people suggested they had any regrets about their pension. However, one in three people also admitted they had withdrawn cash out of necessity. Could we be storing up trouble for the future? I guess only time will tell.”

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  1. I think that people who plunder their pension funds early for just about any reason other than to pay down debt very probably will regret it later on when they realise they have less income than they need. The old maxim of acting in haste and then repenting at leisure is particularly apposite.

    Annuitising without shopping around is highly likely to achieve a less than optimal result, particularly for those with health conditions that could enable them to obtain a significantly better rate. If the FCA is genuinely concerned about this (as it claims to be, but one has to wonder), why does it not ban providers from quoting any annuity figures in their pre-retirement packs (other than those based on GARs)?

    Pension Wise (or whatever it’s called these days) is “a free and impartial Government service offering appointments over the phone or face to face”. And most IFA’s offer an initial consultation at no charge, so reluctance to spend money on taking advice is hardly a valid excuse for not doing so. Those who find their adviser can get them a rate significantly better than what their existing provider is offering will surely see the value of shopping around.

    I’m not anti-Income DrawDown per se, but I really wonder how many people choosing it without advice (and quite possibly many of those who do take advice) have any real idea of the complexities and risks it entails, believing that all annuities are, almost by definition, poor value and that IncDD is some sort of magic mechanism for extracting a quart from a pint pot. How many people who’ve chosen IncDD are now seeing the value of their fund having reduced and/or the need to reduce the level of their withdrawals to slow the rate of capital depletion?

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