23rd June 2015
Hargreaves Lansdown has launched a new low-cost retirement planning service to help investors navigate the pension freedoms.
The service which will charge £395 plus Vat with retirees walked through various scenarios in an hour long session with a Hargreaves Lansdown adviser and encouraged to use calcalutors to understand, among other things, the tax implications of any decision. It will aim to fill the advice gap between the Government backed Pension Wise and traditional financial advisory services though it will stop short of making specific recommendations.
The firm estimates there is demand from around 120,000 people a year for such a low cost advice service.
Tom McPhail, head of pensions research says: “The pension freedoms have fundamentally changed the pension system, overturning many established conventions around how and when investors draw on their retirement savings. The Pension Wise service provides investors with an invaluable introduction to the key issues they need to think about. The HL Retirement Planning Service takes investors a stage further than Pension Wise, walking them through the issues they need to consider when setting up their retirement income.”
HL says that many retirees want such help with 65% of respondents to a survey published in June saying they would value talking through their options with a retirement expert.
It says that the key issues rated by the over 55s as important, very important or essential (in order of popularity are
1. Understanding the retirement options: annuity, drawdown and taking a lump sum directly via Uncrystallised Funds Pension Lump Sum (UFPLS)
2. Understanding how to inflation-proof finances
3. Knowing where to go to get further information and how to get started (e.g. how to convert a pension fund to paying income)
4. Sense check current retirement income plans
5. Understanding the tax payable from each retirement option
The firm estimates that around 28% of investors would not pay for such a service but says more than 50% said they would be willing to pay between £100 and £499 for advice.
HL says that the service will help investors understand
• Their retirement income options and the tax position of each
• How much secure income they might need
• The risks of drawdown and provides guidance on sustainable income
• The need for contingencies, protecting dependents and factoring in potential care costs
• Provides a “sense check” to their current thinking
• Where to go and how to convert their pension into income
After completing a short questionnaire, investors receive a comprehensive report and an hour with a Hargreaves Lansdown financial adviser. The report contains summaries of key issues for the investor to consider and includes a cash flow projection to show how their asset position is affected by drawing their desired level of income.
During the consultation, the financial adviser will walk the investor through the various issues they need to consider when making their retirement income decisions. The investor is encouraged to use online tools such as the income tax calculator and retirement planner tool.