I wonder how many of them Google a medical cure too!
Now I’m all for us being self-empowered and sorting things out ourselves when and where we can, but I recently read a report by Aegon, who have found that a startling 10% of people do not consult an adviser when converting retirement savings into an income.
As an independent financial adviser with a pensions specialism, I find that statistic to be quite alarming. Firstly I can’t imagine why people wouldn’t seek professional independent advice on something as critical as their future financial wellbeing. Secondly, I am reminded of the phrase “You don’t know what you don’t know”. So how on earth are they sure that they are doing the right thing and that they have really been through ALL of the available options? It’s a little like me assuming that my soar throat can only be tonsillitis and setting about watching YouTube footage of a DIY tonsillectomy. When seeking professional medical advice would be the only sensible course of action I should take.
You can’t put the genie back in the bottle
The choices you face when considering your retirement options are vast. Decumulation, or the drawing down of investments, requires a considered approach. Especially, as in the case of annuities, once the choice is made it cannot be reversed or repealed at a later date. It really does demand a serious and in-depth understanding of what is and isn’t available to you, as well as advice on the best course of action to meet your existing and future requirements.
A DIY approach to something this critically important is nothing short of foolhardiness.
History is playing a part
According to Aegon’s global retirement study, there are some worrying factors at play. It’s unfortunate that a traditional annuity currently offers lower levels of guaranteed income than it may once have done. This in turn has fed an increasing demand for drawing down the investment as a lump sum, without seeking professional financial advice. Now even if you don’t come to Bridgewater, can I please ask that you DO go somewhere to seek professional advice? As this needs to be carefully planned with a full understanding of the wide range of investments decisions, choices and potential pitfalls that clients face.
In short, you need expert guidance.
It seems to be a British problem
The global report found that UK savers view annuities as far less appealing than our European counterparts. With just 28% of UK workers wanting to convert their savings into an Annuity, compared to 47% of Netherland’s workers, 44% of German workers and 42% of Spanish workers who all favour this route.
All of which, according to the report, puts UK workers at a much higher risk of suffering from a poor outcome during retirement.
With age comes some wisdom
One upside of the report is that it suggests that those closest to retirement age (60-69 years), seemed to be far more financially literate than their younger contemporaries.
Having said that, only 43% (significantly less than half), were able to properly answer all of the questions asked in the survey. So there is still some worrying lack of knowledge amongst those just about to retire.
Just to put this into some sort of context, the report was compiled from research carried out online between 28 January and 24 February 2020 amongst 14,400 workers and 1,600 retired people across 15 countries: Australia, Brazil, Canada, China, France, Germany, Hungary, India, Japan, the Netherlands, Poland, Spain, Turkey, the United Kingdom, and the United States. The survey was conducted online between January 28 and February 24, 2020.
There is an acknowledgement that the Covid-19 pandemic has presented financial challenges for everyone, particularly for those facing retirement. Not the least because interest rates have remained at rock bottom, with the prospect of an annuity delivering
all-time low returns understandably unappealing. However, decisions are being driven by these factors and outcomes are now being reached that will have a direct impact upon the quality of people’s retirements, without them seeking any expert advice.
The report itself concludes: “People often assume that taking a DIY approach and managing financial decisions themselves will be fine, but the findings of our financial literacy test suggests there are huge risks in taking complex decisions alone. While advice has to be paid for, the cost of not taking it ahead of some of life’s greatest financial decisions could be far higher.”
My advice is.. to get some!
If you are unsure about what to do about your annuity, or even if you are 100% positive what you are going to do, my advice is to seek professional expert financial input.
As always, if you have any questions regarding your annuity, or any other aspects of your retirement planning or your finances in general, then please don’t hesitate to contact one of our team at Bridgewater Financial Services; where one of our independent experts will be on hand to help in any way.