At some stage, most people will try their hand at DIY around the house. Either through necessity or enjoyment, many of us will have painted a bedroom, put up shelves or perhaps even tiled a bathroom.
But I doubt many people will have done things like replaced the gear box on their car or rewired the electrics in their house. It is obvious why not: these are complex procedures that take skill and training, and which could have disastrous consequences if not completed correctly.
I think you know where I am going with this…
I have recently been looking through our data around what people have been doing at retirement since the pension freedoms were introduced. Currently, just over 12 per cent of our customers are using an adviser to help them make decisions on what to do with their pension fund.
I can understand that to some extent. Good quality financial advice does not come cheap and 85 per cent of our customers have a pot worth less than £30,000. It can be difficult to make the case for advice for someone with a pot that size.
Getting the right help
But many of these people are not getting any help at all. We always ask our customers if they have used Pension Wise. Just over half (53 per cent) of them say no and a further 14.5 per cent have not even heard of the service. That leaves just a third having actually contacted Pension Wise, with more than half of those using the service online, as opposed to speaking to someone face to face or on the phone.
As part of our Working Lives Report, we asked people who they trust most when it comes to guidance on long-term savings. Almost a third (31 per cent) said it was themselves and their own research – the most common answer.
Thirteen per cent said they trusted their adviser most. The same proportion said their pension provider, while only seven per cent opted for an IFA provided by their employer.
Some might argue that if people have a small(ish) pot and are
certain they just want to take it all as cash, they can probably guide themselves.
But I do not buy that argument. At 55, someone with a small pot may get excited at the thought of getting their hands on a few thousand pounds to spend as they wish. But given the rising state pension age means most people are preparing to work until close to age 70, these people have got a decent amount of time to grow a bigger fund. They would still have over 10 years to make contributions and for investment growth and compound interest to work its magic.
Too many people are not aware of that, more focused on the short-term reward rather than long-term gain.
Not only are many customers going it alone, many of those are making quite complex decisions. Fifty-seven per cent of customers approaching us about their retirement choices are opting for drawdown and part cash. There is a lot to consider when going down that route. When done properly, a customer should be aware of what percentage of their drawdown fund they can afford to tap into every year so as not to deplete it too quickly. Choices also need to be made on how to invest that remaining fund.
I realise I am preaching to the converted here. Most readers of this article will wholeheartedly agree that more people should be taking advice to make sure they get the best possible outcome in retirement. How we achieve that is the challenge but it is one both advisers and providers must keep progressing.
After all, just because you can watch a YouTube video on how to change your brake pads does not mean you should give it a go.
John Lawson is head of financial research at Aviva