Should you pay a financial adviser for pension help?

The performance of your pension can make a big difference to how comfortably you live in retirement. Is it worth getting expert help?

Saving into a pension to fund your retirement is a “lifetime’s work”, said Unbiased. From building up savings to drawing an income, you only get “one shot”, so it is important to get it right.

Knowing if and when to get financial advice can make a big difference, “ensuring you don’t run out of money in retirement”, said Rest Less.

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Setting up a pension

There is no requirement to use a financial adviser if you want to start saving into a pension. Under auto-enrolment, employees over the age of 22 are automatically entered into workplace pension schemes.

If you are not in a workplace scheme, said Unbiased, you may need a personal pension.

You can manage your own retirement pot through a self-invested personal pension on a DIY investment platform. However, you need a level of confidence and knowledge, said MoneySavingExpert, as “you’ve only got yourself to blame” if you make the wrong investment choices.

Alternatively, an adviser can help set up a pension for you and choose the “right type” of investments to reflect your time frame, goals and risk tolerance, explained Rest Less. The adviser will monitor the performance regularly and can also give you “peace of mind” that your pension is invested sensibly.

Another time to consider using an adviser is if you want to combine lots of old workplace pension pots from previous jobs.

There are companies that do this without the need for advice, such as PensionBee and Profile Pensions, but a financial adviser can help “make sense of the risks involved", explained MoneyToTheMasses, as you may be giving up benefits such as guaranteed annuity rates.

If you have a defined benefit pension – usually offered to those working in the public sector – there is a legal requirement to seek advice on transferring it if the pot is worth more than £30,000.

Accessing your pension

When it comes time for you to access your pension to fund your retirement, there are a lot of choices to make, such as learning about annuities and drawdown options.

“Given the enormity of this decision”, said Rest Less, “it may be worthwhile seeking professional financial advice to understand the best options for you.”

Unless you are in a defined benefit or final salary scheme that pays a set income, said MoneyHelper, savers are “most likely” to have a “sum of money” from a defined contribution scheme that can be turned into retirement income.

Some options are more complex than others, the financial website added, so a financial adviser can explain them and “help you make good decisions and get the best from your pension pot”.

Getting expert advice “can be crucial”, said Which?, to ensure you choose a suitable strategy and ultimately, added The Times Money Mentor, you need to make sure you “won’t run out of money in retirement”.

How much does financial advice cost?

Often the first meeting with a financial adviser is free of charge, said Which?. This initial chat can give you a sense of their personality and “help you decide whether they can provide you with the services that you need”.

After that, advisers typically charge either flat or hourly fees, or a percentage of how much you are investing. Charges range from between 1% and 2% of the value of the assets, according to Unbiased, “with lower percentages charged for larger assets”. Hourly fees can range between £50 and £250.

A decent financial adviser will “justify their fee”, said ThisIsMoney, by hopefully “making you a wealthier individual”.

But there’s no doubt that “the cost of financial advice on your pension can run into thousands of pounds,” added Which?. Luckily there is what's called the pension advice allowance, which lets you take up to £500 out of your pension savings and apply it toward advice, tax free. You can do this three times, “so you can access retirement advice at different stages of your life.” But you can only do this once in any tax year.

You can find a financial adviser at Unbiased or Vouchedfor. If you are over 50, you can also get free guidance from the government-backed Pension Wise service.

Marc Shoffman is an award-winning freelance journalist, specialising in business, property and personal finance. He has a master’s degree in financial journalism from City University and has previously written for FTAdviser, ThisIsMoney, The Mail on Sunday and MoneyWeek.

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