Independent financial advisers (IFAs) unanimously agree that the government’s recent pension reforms coupled with the rise in life expectancy have significantly increased the requirement for ongoing financial advice to clients during retirement, according to a new study by Investec Wealth & Investment (‘IW&I’).

According to the survey, 87% of advisers said their retired clients require ongoing support in generating capital growth as well as income; 78% said that clients are looking to diversify their sources of retirement income; 74% are looking for guidance on how they can preserve their pension pots for inheritance tax purposes by taking income from other assets; and 41% said it was due to property downsizing.

Given the need for pensioners to generate capital growth as well as income from their portfolios, 94% of advisers believe they need to consider a longer term time investment horizon and three-quarters (77%) think they will need to accept a higher degree of volatility.

Piggy Bank (PD)

IW&I’s study highlights the increasing risks facing consumers looking to capitalise on recent pension freedoms: from the 250,000 plus payments worth £1.8 billion that were made to consumers from pension pots from April to June 2015, IFAs estimate that on average 38% of those consumers who took this course of action without professional advice are likely to have forgotten to reclaim income tax on their lump sum.

Mark Stevens, Head of Intermediary Services, Investec Wealth & Investment, said:

Traditionally the need for financial advice tended to taper down during retirement as most of the key decisions had already been made.  Wide-ranging pension reforms that have ended compulsory annuities and enabled pension pots to be passed through the generations tax-free mean the need for advice has never been greater as clients come to terms with these new challenges.

“While pensioners now have considerably more room to manoeuvre, the risks involved in retirement planning strategies are commensurately higher.  Faced with this additional complexity, we have seen a significant rise in the number of advisers seeking to partner with a discretionary fund manager to provide their retired clients with a long term risk-adjusted investment proposition.”

Pension financial advice

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