Do YOU need a financial adviser in retirement?

Cumbo drawdown

The argument is central to most pension debates at the moment.

There are some who would have everyone who reach 55 meet with an adviser.

Others who would limit the pension freedoms to those prepared to pay advisers to manage them

And there are some for whom the metamorphosis of MAS/TPAS into the single guidance body – will do the trick.

Everyone agrees that a Pension Dashbard would be a good thing, but as the days go by, the prospect of a 2019 delivery date seems less and less likely.

Meanwhile we have a broadly favourable global equity market , no reports of panic selling and an uber-prosperous asset management/advisory market for whom dark clouds are on the other side of the horizon.

We  seem to have accepted that around 6% of the population take advice (mainly at the point of “crystallisation” (the point when drawdown starts). Presumably the other 94% are either DIY competent or expecting that something will turn up.

What will turn up?

Of the anticipated solutions, the only obvious answer to the needs of the mass market is to keep the relatively few open collective schemes – open and allow for the creation or conversion of open schemes in future.

As for the creation of collective schemes, these look most likely phoenixes of closed DB schemes (Royal Mail being the obvious example), all the master trusts look candidates for a collective approach post “crystallisation” and a good few of the larger occupational DC schemes – could also go that way.

I say this, not out of some abstract love of actuarial science, but because I can see no capacity among advisers, to manage the drawdowns of 145,000 postal workers,, let alone the 500,000 of us who reach 55 each year.

People are – by and large – waiting for something to turn up and – other than CDC – there ain’t nothing shaking but the leaves on the trees!

Back to Tully, Morrow and Cumbo

If I’m reading the twitter conversation properly, the world is being divided by Morrow into those who can do percentages and can manage drawdown, and those who can’t – who presumably need advice.

Tully’s position is that even those who can do percentages, shouldn’t be given the rope to hang themselves with pension freedom   oops – drawdown.

Cumbo questions whether the pensions industry is knowingly allowing its customer base to be driven to financial hell in a handcart.

Of course Jo Cumbo started this debate by complaining that she wasn’t being given performance figures on her pension (as percentages of assets invested) and had made it clear earlier in the debate that everyone has the right to know how their fund is performing.

jo 3

These are hard and intractable questions and they beg a proper answer.

There is a substantial body of the British population who work all their lives, then stop and expect to continue to get paid a smaller wage till they retire. This group of people includes the self-employed, those who worked a lifetime without a workplace pension as well as the lucky ones who were part of occupational schemes. The vast majority of these people have made some kind of private provision for retirement but most of them don’t know what they invested in and what they’re likely to get.

The lucky ones have the capacity to understand the financial statements that they have to pick their way through, but they are few and far between. Even the experts struggle.


In reality, we have given people freedoms but with them , a series of difficult choices without the one thing they expected – that wage in later life.

In this miasma of information, the only certainty is the single state pension, but even that is  a mystery to most people.

Is it any wonder that Royal Mail workers rallied around Terry Pullinger and the CWU’s call for a “wage for life”?  Is it a surprise that the university teachers went on strike rather than be reliant on a DC pension pot?

The inexorable logic of the exchange between Cumbo, Morrow and Tully is that pension freedoms are for the privileged few who can afford advice and who have the time and energy to understand their DC pots.

This is of course wrong!

Most people (we know) will be able to muddle through their later lives, drawing down their pots at 4% pa and bodging money from their non-pensioned savings to meet their retirement needs. Many people will never spend their retirement savings, living uber-frugally rather than risk being financially dependent, One way or another – most of us will get through our later years (even if we do have to sell the house to pay the nursing fees.

That’s because the people “we know” are people like us, who read blogs like this. They are the 6% who will take advice and those who know (or think they know) enough to do it themselves.

What I am saying is wrong – because for my readership – the mass affluent – the current system is good enough.

But I am right in speaking for those who believed they would get a wage for life in retirement, and who are now being asked to answer questions on subjects were never on their syllabus

Neither adviser nor unadvised drawdown is right for many outside the financial services bubble, the people who don’t read my blog for whom retirement is looming like an undiscovered country.

These people were expecting a wage for life solution and not the challenge of providing themselves with an answer to the hardest problem in economics!

The time to innovate is now!

We are currently in the good times, times when the markets are going well, when mortgage rates are at historic lows and when employment is high.

But this will not last, there will be hard times again, for many austerity has never gone away and for most of us, the threat is that it will be back with us soon.

What we need to do now is to build the  shelters for the vulnerable so that when the hard times come, they have a place for their finances to go.

  • For those who want to manage their own money through retirement, we need to give proper information about what they have , what they should keep and what aggregate.
  • For those who want a wage for life, we should give options to exchange freedoms for an organised dependable income.
  • For those who want to be advised, we must help advisers to do their job – as efficiently as they can.
arf a mo

the only language we understand!

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in advice gap, pensions and tagged , , , , , . Bookmark the permalink.

8 Responses to Do YOU need a financial adviser in retirement?

  1. Gregg McClymont says:

    Well said!

  2. Dave C says:

    Everyone should make the time and energy to understand their pension pots.

    Apathy begets apathy and ‘the state’ is by and large useless in matters of socialism (even socialist states)

    There is no problem in pensions that can’t be solved by individual people taking control rather than handing it away.

    And if you can’t understand percentages which were taught at primary school in the 80s at least, then I’m amazed they’re even employed.
    Percent, per 100.
    It’s possibly THE simplest explanation of quantity changes.
    Like pennies on the pound.

    That’s not to say pension comms are perfect.
    My Scottish Widows statement is useless.
    It needs more information. Instead it’s been simplified to the point of being useless.

    • henry tapper says:

      I bet you were in the top set at school Dave! There were a lot of people in the bottom set who didn’t get percentages. Perhaps they were busy bunking off or maybe they had learning difficulties – either way – we’ve got to remember there are a lot of vulnerable people who don’t do numbers and who take rubbish financial decisions all the time, which is why they are constantly skint! These people need drawdown like a hole in the head!

      • Phil Castle says:

        I agree. I went to a technical high school which conevrted to a grammar when I was in the 3rd year. I was in the top set for maths, but my friend and I were the two BOTTOM of the set for GCE maths. She ended up a paraplaner for a lcoal firm. My understanding of probability meant I knew the subject would come up in my A level applied maths….. it did, but teh question was mixed with non practical applied maths and I calculated the possibility of passing as NIL. So I sat for 2 hours and didn’t write anything. I have “top set” clients whose maths is betetr than mine and whilst they understand percentages (and a lot more), they don’t mentally convert the numbers and so we rightly do so for them so they can make an informed decision. Nearly all of my client are clever enough NOT to have to use an adviser, but they choose to do so as they earn mroe money doing what they do well than they pay me. I do the same with my plumber, electrician and car mechanic. I can do plumbing and I can fix and petrol or diesel engine (I don’t risk doing electrics as I am red green colour blind), I have the qualifications from the Army confirming I can fix vehicles to class 2 (can’t drive trucks though re colour blindness), weld to class 2 and repair small arms at Class 1 and yet as I don’t do it day in day out, I don’t have up to date experience, access to current repair manuals or specialist tools. Hence why I employ other people to do it for me for less than I earn. I have mortagge qualifications and so does my son, but as we don’t do them routinely we don’t do our own, we use mortggae advsiers who don’t have investment and pension permissions.
        For clever clients with financial services, the same logic applies…. use a specialist who does it day in day out.
        Anyway I agree with Henry’s overall conclusion i.e.

        For those who want to manage their own money through retirement, we need to give proper information about what they have , what they should keep and what aggregate.

        For those who want a wage for life, we should give options to exchange freedoms for an organised dependable income.

        For those who want to be advised, we must help advisers to do their job – as efficiently as they can.

  3. John Hutton-Attenborough says:

    Interesting debate. If you buy a car do you do so for the colour or because you have researched the type of car/ engine/ fuel type/ how many seats/ can it accommodate the dog/ take speed humps without spilling your coffee?
    If you buy a pension…do you just buy a pension?

    • Dennis Leech says:

      The difference is that you only buy a pension once. You don’t know what many of the terms mean. Financial advisers ask people what their risk appetite is! And many have no idea what they need and want in retirement, let alone how long it will last.

  4. henry tapper says:

    When you bought a pension from an adviser, you used to give the adviser a commission of up to 75% of the first year’s contributions , this was in exchange for advice for life. No one really believed you got advice for life, you got a savings plan with the option to go back to the adviser to buy an annuity at half time.

    Now you don’t buy a pension from an advisor, you buy an advisor to manage your pension, he’s part of the cost of giving your money to someone else.

    I’m still not sure which system is fairer, or gives better value for money.

    The best way of doing things (IMO) is not to buy a pension at all, but to use the plan your employer offers you. Unfortunately this doesn’t make anyone any money, so for now – we must stick with the buy a pension / buy an adviser model!

    • Phil Castle says:

      What we tend to find for most of our clients who have adequate pension arrangments is eitehr a mixture of DB benefits to provide a secure income to meet the bottom few levels of Maslow’s pyramid and then drawdown for the top few.
      Where they don’t have access to a DB scheme, but have a significant pot, then an annuity for the bottom levels is effectiveluy the same thing and whilst annuities may have quite a bit of bad press, it doesn’t stop them being the right thing to provide an income for life to meet the bottom levels of Maslow’s pyramid. The balance of monies can then remain in drawdown and at a higher level of equitty exposure than if an annuity hadn’t been bought to meet essential needs.
      What i think is wrong in many situations is both the polar extremees of income for life with no flexibility (DB and annuity), or the total drawdown, but with insufficient equity content i.e. too much gilts and bonds, when that is what an annuity is, but with pooled risk cover for longevity. Lastly, the hybrid drawdown products have pretty much been discredited as overpriced and over hear to grab the business (Hartford, Metlife etc) and then do a runner when the going gets tough. The hybrids don’t/didn’t work as theyw ere trying to eb all things to all men when seperate products for seperate needs has proven more appropriate for my mind.

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