Seeking independent financial advice during retirement planning had gotten much more complicated when the Pension Freedom rules went into effect in 2015. The wide range of pension selections, combined with the UK’s dense tax system, means that retirees currently face various decisions about how to maintain their standard of living when they retire.

Regardless of the complexities of contemporary retirement, a study has established that older people are the least likely to talk to a financial advisor about managing their finances. A survey circulated in Money Marketing, which stated that 51% of individuals aged over 65 had never received any financial advice, and 57% said this was due to their ability to do it themselves. Financial planning doesn’t have to end with retirement. Seeking independent financial advice is essential during the transition to life after work.

What Are the Advantages of Hiring an Independent Financial Advisor?

The IFA may often ask you a series of “what-if” questions that you might not have reflected on and help you define your financial objectives. For instance, at what age would you like to go for retirement, and how much do you need, depending on the lifestyle you want?

In case you are seeking to organise a complicated financial item, such as an investment or a pension, you can save (or earn more) money by looking for independent financial advice, particularly if you are unsure of the product’s internal and external details, the tax treatment, and the legislation surrounding it.

The actual value of long-term financial advice appears once you start implementing your financial plan. The IFA can meet with you regularly (at least once a year) to assess your financial plan and make sure it is still relevant to your present situation. The IFA will amend your arrangements with changing markets or financial rules to ensure you remain on track to realise your long-term goals.

Clients Require More Support during Retirement

Although planning for retirement and financial planning are two separate units, they should go together to provide you with the lifestyle you desire. Getting into the finer details of your funds as you come close to retirement is the perfect way to evaluate the actions necessary to maximise your assets. Seeking the help of an expert throughout your work lives and when you reach retirement age is a way to relieve terrible stress and anxiety by the time you reach your retirement age.

A Pension Policy Institute (PPI) report of 2019 looked at the complexity of older individuals’ fiscal decisions in later life. And they found that among people who retired early (55 to 64 years), 19.3% sought advice. This dropped to 15.4% after age 65.

PPI cautioned that too much emphasis had been placed on counseling clients during the “build” phase of their pensions instead of during the retirement period. This is in spite of the introduction of retirement freedoms in 2015, complicating decisions during retirement.

The report says that people are likely to require more support through ongoing mentoring and advice in the future to make the right decisions regarding how to approach their retirement savings and use it to meet their lifestyle.

Taking advice for future planning can have significant benefits in retirement. Here are the reasons why seeking financial advice before retirement is essential.

1. Helps People in Preparing and Planning for Retirement

While only 15% of people over 65 sought fiscal advice, the outcomes of the research performed by Money Marketing showed some differences between the individuals who received advice and the ones who did not.

• Clients who followed the advice were two times as confident in the way and when they wanted to retire.
• Two-thirds (67%) of individuals with financial advisors have already allocated money to their families. This compares to only 40% of individuals without a mentor.
• More than a quarter of advised clients (27%) set an income goal for their retirement, unlike less than a fifth of untrained clients

2. Helps People in Future Planning; Hence, Don’t Run Out of Cash in Retirement

In addition to addressing the options that contemporary retirement requires, the study has also shown that clients who withdraw their income without financial advice are almost three times likely to finish their money than clients who seek financial advice.

A Moneyfacts analysis compared the durability of withdrawal rates among clients who sought advice and who did not. Clients who do not accept advice tend to withdraw a higher fraction of their money, increasing the likelihood that their savings will not last into retirement.

Richard Egling, director of pensions at Moneyfacts, says that withdrawals have many attractive features for those looking to increase elasticity in their retirement planning; however, one of the major trade-offs is that people have to take longevity risks themselves.

Accessing your retirement pension without advice can lead you to pay far more in tax than you require. Generally speaking, if you get over 25% of your retirement fund savings, you only pay income tax on the remaining funds at your marginal percentage.

If the total amount added to the other income pushes you to a higher tax, you could face a hefty tax bill. This can reduce the size of your retirement fund and possibly lower your income in the future.

3. Financial Advice Increases Value

The International Longevity Center published a comprehensive article that tried to quantify the cost that financial advice brings to clients. Their outcomes were revealing and found the following.

• Receiving expert financial advice from 2001 to 2006 resulted in an overall increase in wealth (in financial assets and pensions) of £47,706 from 2014 to 2016.
• Improving the ongoing association with the financial advisor steers towards better financial results. Those who gave an account of receiving advice in the two analysis periods had an average wealth pension approximately 50% higher than individuals who only received counseling initially.
• The advantages of financial advice are likely to be greater for the so-called “newcomers” than for individuals termed “rich.” The first category saw a 24% increase in their retirement wealth, compared to only 11% for the wealthiest classes.

This meant that talking to a financial consultant can offer real, solid benefits to pension wealth. Additionally, regular meetings and reviews with your advisor lead to improved long-term financial results.

Contact Us Today

Finally, we have seen many reasons why it is wise to seek advice before retirement. Research has shown that you may be more prepared to retire better, and less likely to experience financial difficulties. If you are about to retire and have not sought financial advice, contact us today for more information.