What does good pension advice look like

The chances of a client fully understanding the implications of a transfer will vary across the market, most clients who receive an option to transfer focus on one thing and one thing only the “BIG” number on that bit of paper. This can be considerable and may well be an eye-watering number moreover their biggest asset, they see this as life-changing amounts of money, however, the year before it was just a statement that was discarded in the top drawer and forgotten.

This leads people in some cases to making rash and long-term terminal lifetime damage which cannot be changed once they have signed that bit of paper. They have planned what they intend to do before they have sought any advice -they have made up their mind and are ready to live the dream they have always wanted- that fancy holiday in the Maldives, New car- I have always wanted a sports car instead of that white van.

So where do they start? Find an adviser who will provide the advice at the lowest cost- that seems the best option, hop on to unbiased.co.uk -sorted. Well that’s is where the problem starts when they look a bit deeper and find that there is a little more to it than meets the eye. This is where the lack of financial literacy kicks in hard-What do you mean it is not advisable to transfer my pension I WANT MY MONEY.

They then start to trail round every adviser until they find one who will take the instruction to transfer for small fee-no takers I am afraid, however, in the dark side of the financial world there is always someone willing to do it for a handsome fee (5% transfer fee anyone). I see these types of cases on a regular basis they have been told “NO” Stay where you are or not willing to pay an appropriate financial planning fee. Desperation starts to kick in as they have already requested the CETV and the clock is ticking by tick tick tick and still they hunt for that elusive signature like a drug addict seeking his fix -They have made their mind up without fully understanding the consequences.

FCA states that a minimum of 14 hours of work is involved to provide a suitable overview analysing all the details, I suggest it is closer to 20-25 hours work from my experience this is mainly caused by the ineptitude of most schemes and the information they provide is inaccurate or just wrong and with a lead-in time of 40 days to provide a suitable answer on each occasion the 3 month window become very tight in most circumstances.

The starting point for any discussion is based on Needs and Objectives -what do you want to achieve in retirement-Why now? What do you not like about a Guaranteed income for life?

Building a lifetime cashflow plan is the starting point looking at all the available asset at your disposal –top tip if the DB pension is all you have stick with it, it is most likely if you transfer you may end up very poor in your eighties or sometime earlier and well before your demise.Factor in various risks not only investment risk or capacity for loss or indeed loss of capacity think a bit wider. Sequence risk drawing out too much income in the short term can have a massive effect on the long-term income sustainability.

Longevity risk, we are all living longer they estimate that more people will be receiving a telegram from the Queen or King in the future so running out of money in your eighties could leave some with 20 years of basic state pension to live on.

How income should be structured and where will this come from, people tend to retire and decide to take 25% tax-free cash and then place this in a bank account for no real reason they think they should do so at retirement, however they may have £200,000 in an Isa so why take the money out of pension fund? Start to use other assets first -Cash, General investments, Individual Saving Account, Pensions are the most IHT efficient which helps to avoid the Taxman’s nasty 40% tax even at 75 the 25% tax charge is better than 40% IHT bill.

Stay away from investment schemes that seem too good to be true investment offering 10%+ per annum guaranteed, Property in a various far-flung location, forestry plantation, storage pods I could go on, these should be avoided at all costs-KEEP IT SIMPLE.

Build from a solid foundation (cashflow) seek advice annually in most cases engaging a financial planner may cost less than you think and cheaper than a do it yourself option providing some comfort from regulated financial advice.

Financial freedom is in your hands if you seek the advice small changes today can make a lifetime of comfort for you and your family.