Consumers want advice following the Budget

Almost two thirds of consumers plan to seek independent financial advice at retirement as a result of changes to the pensions regime announced in the Budget, according to research by consultants PricewaterhouseCoopers (PwC).

A survey of 1,200 consumers between the ages of 50 and 75 revealed that 63% wanted or planned to obtain financial advice.

However, PwC warned that not all these people would be able to afford advice due to the small size of their pension pots. Half of those surveyed had a pot of less than £40,000.

PwC UK insurance leader Jonathan Howe said: ‘63% of consumers have or intend to ask for financial advice from an IFA. However, the key point here is that many consumers may not have a big enough pension pot to justify significant advice fees, particularly since the retail distribution review last year IFAs now have to charge fixed service fees to customers.

‘What we will see is an advice “black hole”, a supply gap between what consumers want and what they get.’

In the Budget chancellor George Osborne announced measures to dramatically increase flexibility of pensions at retirement, cutting the 55% tax charge for people accessing their entire pension at retirement from 2015.

Under the plans, savers who take their pension as cash will get the first 25% tax free with the remaining 75% taxed at their marginal rate.

The PwC survey found that while consumers still wanted to buy a financial product at retirement, only 16% said they planned to buy an annuity.

The consultants also estimated that the government’s guidance guarantee could cost as much as £120 million a year to deliver.