Scottish Widows raises low-cost advice concerns

More than 40 per cent of lower income households do not know where to turn for advice or guidance on their pension savings, according to figures published by Scottish Widows.

The provider asked more than 5,000 UK adults where they would go for guidance and advice on their savings in a survey carried out before the election. Of those earning less than £10,000 or in a household earning less than £30,000, just 6 per cent said they would visit a paid for professional adviser, and the same proportion said they would seek guidance from Pension Wise.

Almost one in ten said that they would seek information from their current pensions provider, and 18 per cent opted for an internet search engine.

Just 16 per cent of low earners said they would seek an adviser, while 26 per cent again said they didn’t know where to turn, and 6 per cent again said they would visit Pension Wise. However, some 42 per cent admitted they did not know who they would turn to for advice or guidance.

The numbers are in sharp contrast to figures for the highest earners, of which 42 per cent said they would visit an adviser, and just 2 per cent would opt for the Government-backed guidance service.

Across all income bands, 4 per cent of savers stated an intention to use Pension Wise, while 13 per cent said they would look to  regulated adviser.

Scottish Widows said the figures indicate a widely held public desire for personalised recommendations at a price lower than that currently offered through independent financial advice.

It said: “However, because of the restrictions placed by the regulator upon the UK’s advice market, there is no low-cost mass-market for financial advice; despite the opportunities presented by modern technology.

“We urge the Government to promote Pension Wise more widely, and the regulator to do more to create the conditions for the development of a market for low-cost financial advice.”

The comments come after new pensions minister Baroness Altmann last week told the House of Lords last week she has already held talks with the FCA on the topics of excessive provider charges and the ability of savers to access affordable advice.

Meanwhile, Scottish Widows also hailed the progress in retirement saving achieved through auto-enrolment.

Some 56 per cent of people are now saving adequately for retirement, the firm said, the largest proportion yet recorded as part of its annual UK retirement report.

“There has been a crucial step up form the figures we saw just three years ago, when average savings rates had been stuck at around 9 per cent of earnings, as for most of the last decade,” Scottish Widows said.

“As the latest pensions reforms kicked in, particularly auto-enrolment, that figure rose to 10 per cent before reaching a strong new high this year of 12.1 per cent. This means that on average the nation’s savers are finally putting away the amount they need to. It’s a huge win.”