A new survey produced by Metlife has found a majority of IFA’s would reduce their fees for those retirees with a pension pot of under £50,000. Of the 100 IFA’s they questioned, 67% said they would reduce fees where the client had a small pension fund. Another finding from the data was that there was strong demand for advice from those people with ‘minimal savings’. Nearly a third of those questioned also thought that those retirees with a fund under £50,000 would still be willing to pay for advice. There was also a striking geographical divide among IFA’s with 87% of those based in the South-West saying they would reduce fees but just 17% in London, perhaps reflecting the higher cost of living in the capital.
The report also found that the average pension fund size in the UK was around £68,000 but that nearly 40% of funds were indeed under £50,000. Again there are sharp regional differences when it comes to average fund sizes. For example IFA’s in London manage client’s with pension funds of around £86,700, whereas the average pot size in the North-West is just £54,000. Dominic Grinstead MD of MetLife UK says that retirement income planning is as much as getting the best rates as it is about getting advice. He added that with auto-enrollment commencing this October there will be a lot more clients with smaller funds in the future, so it was encouraging that a majority of advisers would reduce their funds for small pots.
The survey comes on the back of news that the National Association of Pension Funds have been lobbying the government to tackle the problem small pension pots. They cite research undertaken by Institute of Fiscal Studies andthe Economic and Social Research Council (ESRC) showing that £1.4bn is tied up in small pension pots worth less than £5,000, leaving those individual’s ‘stranded’. Darren Philp from NAPF says one solution would be to combine small pots and also to create ‘super trust schemes’ that would accept small pots and consider the interests of those savers will a lower than average fund.