Retirement savers want the free pensions guidance promised by the Government to everyone retiring from April 2015 to be delivered face-to-face, a survey has found.
Almost 70% of pre-retirees would like their options explained in a formal session with a qualified adviser, says Consumer Intelligence, while 24% would settle for online guidance with a helpline.
Meanwhile a report by adviser search site unbiased.co.uk and Prudential says 20% of the population is now more confused by their retirement options following the Budget.
Loading article content
The chancellor has promised that members of defined contribution schemes "will be offered free, impartial, face-to-face advice" at retirement from April 2015.
But while the Government has pledged £20million over two years towards enabling that to happen, alongside an unspecified levy on the industry, the Association of Professional Financial Advisers (Apfa) says full face to-face advice for the 10,000 people retiring every week would cost over £300m a year.
Research published this week by PwC found almost two-thirds of 50 to 75-year-olds intend to approach an IFA for advice, despite half of respondents having pension pots below £40,000. "This questions the affordability of advice," PwC says. " IFAs may not be able to provide value for money for small pension pots."
According to Apfa, the average flat fee currently charged by an IFA for full advice on annuities is £681.
However, the Government has now made clear that the chancellor's promise relates only to "guidance" on a range of options and not full-blown advice.
The Money Advice Service currently delivers 2,000 face-to-face guidance sessions every week at an average cost of around £70. That would bring the national bill down to nearer £35m a year. Experts say an in-between solution might be a limited half-hour session with a qualified adviser costing £250.
PwC UK insurance leader, Jonathan Howe, said: "What we will see is an advice 'black hole' - a supply gap between what consumers want and what they can get."
But pension companies, who have recently been forced to defend the tactics they use in selling their customers highly profitable annuities, can now be expected to become far more proactive.
Mr Howe said: "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. This is a good opportunity for financial institutions to react to customers and to offer new products and services that suit their needs."
Consumer Intelligence found that on average retirement savers would be willing to travel 11.4 miles for face-to-face guidance with only 8% happy to travel more than 25 miles.
It also found 5% — or 500 people every week — threatening to "blow all their money and rely solely on the state pension".
Almost half of those with the smallest pension pots said they would use them to buy an income, whereas six out of seven of those with the biggest pots said they would not be looking at an annuity.
In total only 9% said they would rely purely on an annuity for retirement income, with 26% intending to use a mixture of annuity, drawdown and cashing in, 14% considering an annuity alongside cashing in, and 7% annuity plus drawdown.
The PwC research calculated that only 16% of pension pots would be invested in annuities.
David Black of Consumer Intelligence said: "Face-to-face guidance is by far the preferred option for the free advice proposed by the Government with most people willing to travel to ensure they get as much help exploring their options as possible. However, it does appear that claims about people blowing all their cash on Lamborghinis are not going to come true."
Advisers however are also warning (see below) that the new freedom for investors will also bring dangers.