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Changes proposed by the FCA may help prompt more people to seek pension advice


The FCA paper issued today on pension reforms looks to increase the level of information communicated from providers to pension customers. The intention is to ensure the customer is continuously updated with relevant information that will help them not only with an initial decision but with ongoing decisions. These extra measures will make it more explicit to customers if their current level of income is unsustainable, and could act as a prompt for them to seek financial advice.

According to research from YouGov and Old Mutual Wealth, when people have a financial plan in place and see a financial adviser regularly they receive, on average, 53% more retirement income, so anything which may prompt customers to seek advice will be of benefit.  Advice is also valuable as a pension may not be their only source of income in retirement, so looking at a holistic plan can really benefit customers.

Increased protection for those in debt

One of the specific proposals outlined in the paper is to make it clear that creditors must not pressurise customers to use their pension savings to repay a debt. The proposals seek to remind both debt collection and advice firms that ‘advising on the conversion or transfer of pension benefits is a regulated activity’. This extra layer of protection means consumers can now check whether their adviser is authorised by the FCA to give them such advice.

This tougher stance could be an attempt to try and curb the amount of people using the new pension freedoms to pay-off debt; according to research* from YouGov and Old Mutual Wealth 1 in 5 currently assessing their pension fund are using the money to repay debt.

The research also shows that almost one-third of retired people are still in debt at the point they give up full time work. The average amount of debt at retirement is £34,500, with 19% of people having debts of over £50,000. Mortgage debt is most common, with 21% of people still owing money on their house when they retire, 14% owe money on credit or store cards, and 6% have unsecured loans.

Adrian Walker, pension expert, Old Mutual Wealth comments:

“Freedom and choice reform has made taking money out of a pension a lot more complex than it used to be, when for many it was a simple choice between different annuities. Anything which may prompt people to seek financial advice is a good thing. Not only do people need to decide how much income to access, they need to also consider whether taking money out their pension is the right thing to do from an estate planning perspective.

“People need to consider the best way of paying off their debt, and whilst many will prefer to pay off lump sum amounts to free themselves from the burden of debt, it may make better financial sense to pay off smaller amounts from income to help ensure a more sustainable pension income in the long-term.  Taking out lumps of capital will erode the income over the longer term and it is good that consumers will have extra protection.”

* YouGov Plc research:  Total sample size was 1649 adults. Fieldwork was undertaken between 15/05/2015 - 18/05/2015.  The survey was carried out online. The figures have been weighted.

Sophie Heywood (Lenton)  
Corporate Communications Manager | Old Mutual Wealth

M: +44 (0)7834 499 558

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Notes to editors:

About Quilter plc:

Quilter plc is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

Quilter plc oversees £118.1 billion in customer investments (as at 30 September 2018).

It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset investment solutions and discretionary fund management.

The business is comprised of two segments: Wealth Platforms and Advice and Wealth Management.

Wealth Platforms includes the Old Mutual Wealth UK Platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

Advice and Wealth Management encompasses the financial planning network, Intrinsic; Quilter Private Client Advisers; discretionary fund management business, Quilter Cheviot; and Quilter Investors, the Multi-asset investment solutions business.

The Quilter plc businesses are being re-branded to Quilter over a period of approximately two years:

• The Multi-asset business is now Quilter Investors

• Intrinsic to Quilter Financial Planning

• The private client advisers business is now Quilter Private Client Advisers

• The UK Platform to Quilter Wealth Solutions

• The International business to Quilter International

• The Heritage life assurance business to Quilter Life Assurance

• Quilter Cheviot will retain its name

This press release is for journalists only and should not be relied upon by financial advisers or customers.

Please remember that past performance is not a guide to future performance. The value of investments and the income from them can go down as well as up and investors may not get back any of the amount originally invested. Exchange rate changes may cause the value of overseas investments to rise or fall.

This communication is issued by Quilter plc.  Registered office: Millennium Bridge House, 2 Lambeth Hill, London EC4V 4AJ, United Kingdom. Registered number: 6404270.  Registered in England.