Research by HSBC suggests that the need for a pension transfer review costs savers an estimated £1.7 billion each year.
The research looked at the costs involved in company pension scheme members accessing their pension pots on retirement. The concern raised is that company pension schemes aren’t offering enough retirement solutions to their members. This is forcing them to look outside their scheme for pension transfer review help. Which HSBC claims adds costs because:
- Savers are making large single lump withdrawals which are not tax efficient. Because of the lack of advice.
- Savers are paying for annual advice when they may not need the advice if their company scheme offered advice as part of the package.
- Transferring out of a company scheme into another provider’s scheme to access funds incurs transfer costs and potentially higher annual management charges.
The FCA’s own figures do seem to back up HSBC’s claims. In 2020/21 over 700,000 people accessed their pension pots for the first time. Up almost 20% on the year before. Of these, over 50% accessed their pensions to draw down lump sums. Well over 10,000 savers said that they accessed their pensions without taking any professional advice.
The number of those entering pension drawdown increased by 25% and the number of annuities purchased rose by 13%. All indicating the need for advice. Despite this the research found that almost no company schemes offered pension transfer review or drawdown advice.
It seems that the focus is always on accumulation.
Auto Enrolment is a prime example, although it has been a force for good introducing pension savings for millions of workers.
The impending Consumer duty is interesting, however. It will move the goalposts. There will be increased focus on customer value and the prevention of harm. This could have the effect of tying together the need for pension transfer review and drawdown advice, just as much as the initial savings advice.
In other news, the latest figures released (25/11/22) by Aberdeen showed that the amount invested in their investment products had gone down by 11% over the last six months. But the amounts invested in ISA’s and pensions rose by just over 1%. This seems to indicate a shift in savers priorities away from investments.