Most consumers want or already receive advice on how to access their pension pot in the wake of the Budget, but research suggests the size of their pot does not justify the cost of advice.
PricewaterhouseCoopers has published research into whether consumers are looking for advice on their pension following the radical shake-up announced in last month’s Budget which will allow people to access their entire pension pot from age 55 from next April.
Based on a survey of 1,208 consumers aged between 50 and 75, PwC found 63 per cent of repsondents intend to pay for advice on accessing their pension at retirement.
However, half of the respondents in the survey had pension pots worth £40,000 or less.
PwC estimates the annuity market could contract by up to 75 per cent, and have warned of an advice “black hole” between the level of help consumers want and what they can afford.
Pwc insurance leader Jonathan Howe says: “People still want to invest a small part of their pension pot in an annuity, but it is crucial insurers offer innovative new products to satisfy their customer demands and to fill the hole left by up to a 75 per cent fall in annuity sales.
“63 per cent of consumers have or intend to ask for financial advice from an IFA on how they will access their pension pot. However, the key point here is many consumers may not have a big enough pension pot to justify significant advice fees. What we will see is an advice ‘black hole’ – a supply gap between what consumers want and what they can get.”
The company estimates that only 16 per cent of pension pots will be invested in annuities following the Budget reforms.
The research also highlighted the key priorities in accessing a pension pot for consumers are the certainty of a guaranteed income and tax efficiency.
Alongside the pension reforms, Osborne pledged to offer an at-retirement “right to advice”, later clarified as a “guidance guarantee”.
Howe adds: “The Government’s free guidance will no doubt have its limits, and consumers will turn to their product providers for help in deciding what to do.”