Financial Advisers Raised Fees for Getting Pension Help after Freedom Reforms
By Staff Writer
Financial advisers increased basic pension services fees over the year after freedom reforms, according to new study.
This is Money reports that financial advisers raised the cost for pension help by 16 to 17 percent. To get advice on how to turn a £100,000 pension pot into a lump sum, advisers increased their fees to £1,750 from £1,500. Meanwhile, the fee for a drawdown scheme for £300,000 pot has increased to £3,500 from £3,000. These are the middle figures from adviser website unbiased.co.uk from October 2014 to July 2015.
According to The Telegraph UK, the pension freedom reforms imposed by the government lets people who are over 55 unlock savings they have gathered over decades and spend, save, or invest them however they want to. This major change in pension was welcomed by most, but it would mean that more people need better financial advice to navigate through the system. Otherwise, they might waste their pension pots over the wrong things.
As noted by Unbiased, people saving 200 a month until their retirement will pay a median fee of £580 to get help from financial advisers. That figure has jumped from £500 since the last nine months.
However, for a full-scale help on a £200,000 pot dropped to £2,500 from £3,000. The median hourly rate for financial advisers remained at £150, so does the fee for a initial financial review at £500. This means the increase in fee is focused on a certain aspect.
The pension freedom reforms no longer require people over 55 to buy poor and unpopular annuity, which guarantees a lifetime of income. Now, more people are opting for income drawdown schemes, which used to be only available for the wealthy. These schemes, however, are complicated and involve a lot of investment risks. People can go to the Government's Pension Wise service for free financial guidance, but it is not as comprehensive and as personal as what other financial advisers can provide.