Getting professional financial advice on your pension will set you back almost £3,000, on average, exclusive Which? research on the charges you could face to plan your retirement reveals.
Which? surveyed more than 100 financial advisers in May this year to uncover the different ways they charge people for a variety of retirement scenarios.
Furthermore, Which? found that just one in five (20%) advisers publish the full details of their charges on their websites for different scenarios - making it tough for consumers to know in advance what fees they could face.
In retirement, you might need to consider your investment strategy and manage a portfolio for the first time. Many people are, unsurprisingly, daunted by the intricacies of retirement planning and require professional help to make the right decisions
Here, Which? explains the cost of advice at retirement, and whether the free alternatives are worth considering.
We presented five retirement scenarios to 102 independent financial advisers to gauge their charges.The results are detailed in the table below.
We show the average charge from the responses to our survey, the lowest quote we received, and the highest quote we received, all in pounds and pence.
|Retirement advice on a pension worth £100,000||Transferring multiple pensions worth £150,000 into a single plan||Taking 25% from a £150,000 pension and entering a drawdown plan||Investing a £60,000 inheritance in investment funds||Annual review for a portfolio of investment funds worth £60,000|
Most advisers (79%) charge an upfront fee which is calculated as a percentage of the amount to be invested, with an average fee of 2.7%.
A similar proportion of advisers (87%) charge in the same way for ongoing advice and annual reviews, at an average rate of 1.3%.
Upfront fees varied considerably for this undertaking. For a pension pot worth £150,000, the average cost was £2,383, or around 1.6% of the total pension, and the highest amount quoted an eye-watering £4,500.
However, nearly one in four advisers would want £4,500 or more for this work.
Our survey of advisers also probed how transparent they are about their costs.
Only 20% of advisers have full details of charges on their website with fees for different scenarios. A further 34% published rough costs or a key facts document outlining some fees and charges.
This leaves nearly half of advisers (46%) with absolutely no information on their website about their charges.
If you call an adviser to discuss costs, you'll likely to have a more positive experience. Most advisers (87%) said they would provide a rough idea about how much advice is likely to cost during their initial telephone enquiry, and of these the majority of advisers (62%) would do it without being asked.
If you're unwilling or unable to pay for financial advice, you can get free guidance, in some cases 'personalised guidance', from a number of government-provided services -Pension Wise, The Pensions Advisory Service (TPAS) and the Money Advice Service.
We used undercover fieldworkers to make a number of calls to the services in June 2018 asking for assistance with plans to cash in a £100,000 pension to pay off an outstanding mortgage and to consolidate three pensions into a single plan.
Pension Wise was set up in 2015 to coincide with the introduction of the so-called pension freedoms. You can have a conversation over the phone (which we opted to do) or face-to-face, but you must be over the age of 50 and have a defined contributionpension.
Despite the current eight-week wait for an appointment, our mystery shoppers eventually dealt with well-informed call handlers who asked personal questions and then covered the chosen retirement option in detail.
The calls followed the same broad format, lasting about 45 minutes - questions about the consumer's finances, health, family situation and pension provision, followed by points to consider with the preferred option, and finally an overview of the alternatives.
In our scenario, the call handlers had some insightful observations about the tax liability if you take a pot in one go, even working out how much exactly you would pay in tax, and also gave clear warnings about potential scams.
Callers to The Pension Advisory Service (TPAS) can get straight through to someone to discuss their question. Our first call about cashing in the pension was fairly succinct, with the caller told to contact her pension provider, phone Pension Wise or seek financial advice.
The other telephone call was more productive, with tax implications discussed and the dangers of having no alternative retirement income highlighted.
Conversations about pension consolidation were again quite brief. However, some key considerations around the flexibility gained by keeping the pots separate, the potential loss of benefits and possible transfer penalties were outlined by TPAS.
A point about managing separate pots effectively in the post-2015 world was particularly insightful.
The Money Advice Service covers all financial issues, with phone menu options for debt, pensions, benefits, home/mortgages and 'other'. If you choose pensions, you're connected to someone at TPAS.
We chose the mortgages option and explained we wanted to pay off our home loan by cashing in a pension. Speaking to a financial adviser was immediately suggested and some help given to find one.
By their nature, the guidance services featured above will have their limitations. Call handlers can outline options and provide impartial guidance (sometimes 'personalised' to reflect your individual circumstances), but they can't provide financial advice or recommend specific products.
While the costs may seem high, paying for professional advice could be an invaluable investment - especially if you have little experience investing.
A financial adviser has the tools and experience to help you plan for a future without work and make sure your savings last throughout your retirement.
Here are some things to consider:
When should I see an adviser? An adviser can add value when you're considering complex products, such as or investments, or significant decisions in life, such as retirement or , and don't have the time, knowledge or confidence to make decisions yourself.
Is there a minimum amount of money required for advice? It's slight misconception that only people with substantial wealth should get advice. If you're charged a set percentage of your fund value it can prove cost effective.
That said, some advisers do require a minimum amount of investible assets - we found 31% of financial advisers in our survey required £50,000 plus, while 20% required £100,000 plus.
Are other sources of income important? Yes - the more guaranteed income you have, for example from a or an , the better you're positioned to take some risks with your savings or cash from other pensions.