Financial Advice Boosts Retirement Wealth by £47,000

Research by the International Longevity Centre reveals that those who take financial advice could be £47,000 wealthier than those who do not

Holly Black 28 November, 2019 | 10:42AM

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Investors who take financial advice are £47,000 better off than those who go it alone, according to research by Royal London and the International Longevity Centre (ILC).

The study analysed the wealth of thousands of individuals and found that typically those who use professional advice had an extra £31,000 of pension wealth and £16,000 in non-pension wealth after just a decade compared with someone who did not take advice.

David Sinclair, director of the ILC, says: “The simple fact is that those who take advice are likely to be richer in retirement.”

The ILC looked at those who received advice between 2001 and 2006 and found that by 2014 they were typically £47,706 better off. It says the benefits were particularly felt by those of “more modest means” rather than those who were already affluent.

Non-affluent investors saw their wealth boosted by an impressive 35% by taking advice with a 24% uplift to their pension wealth. Affluent investors saw their wealth bolstered by 24% and their pension boosted by 11% if they took advice.

But Sinclair says “far too many people” who invest still do not use financial advice and that more must be done to encourage people to seek help from an adviser.

Steve Webb, director of policy at Royal London, said one of the main problems is that the value of advice is very difficult to quantify. He believes the research shows the “strikingly large” positive impact that advice can have: “If financial advice can add £40,000 to your wealth over a decade compared with not taking advice, it is incumbent on government, regulators, providers and the advice professional to work together to make sure that more people are sharing in this uplift.”

Saving into a pension is particularly important as research from fund supermarket Hargreaves Lansdown shows the majority of people don’t think the State Pension will still exist when they retire.

Just 28% of those aged under 35 think they will receive the State Pension, and 35% of those aged 35 to 54. Even 23% of those aged 55 and over, who are just a matter of years away from retirement, are not convinced the State Pension will still exist when they stop working.

It means saving enough to ensure a comfortable retirement is more important than ever people. The new flat rate State Pension currently pays £168.60 a week, or £8,767.20 a year – Hargreaves Lansdown calculates that individuals would have to save an eye-watering £300,000 in order to buy an annuity guaranteeing this level of income. An individual would have to save £202 a month for 40 years – assuming growth of 5% a year – to build a pot this size.

Yet few people are confident they are saving enough to ensure they have a comfortable retirement. Just 9% of savers are “very confident” they will be comfortable in retirement, according to a survey by NFU Mutual, and just 6% of women. More than 40% of people aged between 35 and 54 are “nervous” about their retirement finances.

 

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About Author

Holly Black  is Senior Editor, Morningstar.co.uk

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