A new report from unbiased.co.uk and Standard Life shows that taking independent financial advice could provide consumers with a retirement income boost by more than £2,780 a year on average, which could increase your monthly pension by as much as £2321.
The figures, which form part of unbiased.co.uk and Standard Life’s Value of Advice campaign, compare the differences in pension savings and contributions between consumers who have taken independent financial advice on their retirement provision and those who haven’t. The report2 shows the current average pension pot for consumers who have been advised on their retirement planning is £74,554.30, double that of those not seeking advice (£37,277.10). Again, those who have taken advice put nearly a third more a month (£167 v £108) into their pension plan. Those who haven’t taken advice think that people should be putting away, on average, 9% of their total salary, compared to the advised group who think people should be aiming for 11.4%.
Based on a 54-year old (the average age of pension savers surveyed), this could mean the difference between getting a £493 a month retirement income (based on the advised figure) versus £261 a month (non-advised) 1.
Karen Barrett, Chief Executive of unbiased.co.uk, comments: It’s vital to get the message across to consumers that when they are planning their finances, taking independent financial advice is something almost everyone should consider. For the majority, independent financial advice is within their means and can provide peace of mind. Our joint report shows that those who have taken advice are far better positioned right now for retirement than those who haven’t. Consumers are currently faced with delayed retirement ages and rising life expectancies – we are an aging population and we need to be putting the right preparations in place for this.”
The Value of Advice campaign aims to demonstrate the long-term value to consumers of seeking independent financial advice. The results compare the differences between those who have sought advice from an IFA on financial products and those who have not, exploring the financial circumstances and attitudes of consumers towards their finances. In order to produce comparable results, the research has been based on consumers with an average gross household income of £15,000 or more.
Karen Barrett comments: “We believe that there is a strong need and a great opportunity for a targeted consumer awareness campaign clearly spelling out why advice is important and what exactly an independent financial adviser adds to the process of financial planning.
“In the lead up to the implementation of the Retail Distribution Review, we are seeing greater emphasis placed on the advice process and the value it adds - but while the advice industry is undergoing numerous changes the RDR ‘tag’ bears no meaning to consumers. I’d like to thank Standard Life for also recognising that a campaign such as the ‘Value of Advice’ was needed in order to make consumers aware.
“It’s our aim to tackle the misconception that financial advice is free, it has never been free and like other forms of professional advice (solicitor, accountant) we need to clearly demonstrate that the service IFAs provide comes at a cost but, as our research shows, one that is well worth paying for.”
Dave McGovern, Head of Retail Marketing at Standard Life, commented: “Like most things in life, when you’re tackling something complex or have difficult questions you’ll probably turn to a professional. For many people, decisions about their money fall into this ‘complex’ category. For this reason, more and more people are investing in professional financial advice.
"A good adviser will quickly understand your financial position and help you identify your goals. They’ll look at the lifestyle you have today and the one you want in the future. They’ll understand how you want to invest and what your financial – and life – priorities are. With this insight they’ll prepare a financial plan that’s unique to you, and more importantly, a plan that will adapt as your needs change. In short, they’ll make dealing with your finances easier, giving you greater confidence and certainty over your long-term plans. Good financial advice is something we are passionate about at Standard Life and that’s why we’re working closely with unbiased.co.uk to help promote its value to the consumer.”
HIGHLIGHTING THE GAP BETWEEN ADVISED AND NON ADVISED
Of those who have been advised 55% have a work pension and over a third have a private pension (39%), compared to those who haven’t taken advice - 51% have a work pension and only 21% have a private pension.
STATE OF THE ADVISED NATION
Looking at the nation as a whole, only 18% of the population has sought advice from an IFA3. Unsurprisingly the majority of this group are aged over 35 (79%); of those who have sought advice the highest number (23%) of consumers are aged between 60 and 69, 22% are aged 50-59, 19% are aged 40-49 and a further 22% are between 30 and 39. Only 7% were aged between 20 and 29 years old. The data shows that more men than women seek advice on private pensions, SIPPs, and income protection, leaving men in general better positioned for the future than women.
To seek help from an IFA who can walk you through your options, visit www.unbiased.co.uk to carry out a free and confidential search.
The unbiased.co.uk / Standard Life ‘Value of Advice’ report is part of a wider initiative to highlight the benefits that independent financial advice can have on a consumer’s personal financial situation. This is the first in a series of releases in the lead up to RDR next year – the professional advice website will be utilising social media and draw upon the help of its expert panel of more than 200 media IFAs to offer advice and insight.
The full report can be found at: Value of Advice
1 Calculations based on:
6% annual investment return after charges, monthly contributions escalating by 2.5% per annum, 2.5% inflation
Annual paying joint life annuity with 50% spouse’s benefit, 3% escalating
All to age 65
IFA advised on pension planning:
Average monthly pension contribution: £167.01
Average pension pot at age 54*: £74,554.30
Total pension pot at retirement age of 65: £175,121
Annual retirement income of £5,921 (£493 monthly) in today’s terms
Non IFA advised:
Average monthly pension contribution: £108.00
Average pension pot at age 54*: £37,277.10
Total pension pot at retirement age of 65: £92,616
Annual retirement income of £3,132 (£261 monthly) in today’s terms
* based on a 54 year-old, the age of the average person answering the retirement saving question in our research.
2 Research based on Opinium Research results, 1044 online interviews (had taken advice from an IFA) and 1,219 online interviews (had not taken advice from an IFA) from 30 May – 7 June 2012
3 Opinium Research carried out an online poll of 2,011 UK adults from 25 May – 28 May 2012 (nationally representative)
Advised – consumers who have taken advice from an IFA when taking out a financial product
Non-advised – consumers who have not taken advice from an IFA when taking out a financial product
For more information contact:
Karen Barrett, Chief Executive, unbiased.co.uk: 020 7107 2060
Lisa Grando/ Emily Falla/ Maddy Morgan Williams, Lansons Communications: 020 7294 3682
For expert commentary or case studies from over 200 media-friendly IFAs, journalists should visit www.unbiased.co.uk/bluebook.
About unbiased.co.uk, the professional advice website
The unbiased.co.ukportal is a free and confidential UK-wide search matching consumers with local professional advisers: ‘find an IFA’, ‘find a mortgage adviser’, ‘find a solicitor’, and ‘find an accountant’. These searches enable consumers to find professional advisers by postcode, area of specialism, qualification and payment method. In 2011, unbiased.co.ukfulfilled around 450,000 searches for local, professional advice.
Unbiased Ltd - Registered Office: 12-14 Berry St, London, EC1V 0AU. Registered in England: No. 06775878)