Independent financial advisers are taking as much as £3,750 in fees from average earners who need guidance on the new pension freedoms, according to mystery shopping by consumer group Which?.
Just one in 50 financial advisers clearly publish their fees and charges, said Which?, leaving most customers with no advance indication of what they could be charged.
Which? uncovered a dramatic range in fees for the same customer issue. For example, the cost of independent retirement advice on a £100,000 pension pot ranged from just £100 through to £3,750, with the average at £1,863.
Even when contacted by Which? researchers, only a third of IFAs provided a rough idea of fees, and one in 10 refused to divulge costs even during an initial telephone enquiry.
Hourly fees also vary markedly. The minimum was £58 an hour, the maximum £350 an hour and the average was £164.
When the new pension freedoms – allowing individuals to do what they like with their pension savings from age 55 – were unveiled by chancellor George Osborne in 2014, he promised “free impartial advice on how to get the most of their pension”.
But the word advice was quickly replaced by guidance, and is largely limited to online and telephone services, although face-to-face sessions are increasingly being made available.
Some savers have reportedly been blocked by major pension companies from accessing their cash without first paying for independent financial advice, with the bill running into thousands of pounds.
Which? executive director, Richard Lloyd said: “Paying for financial advice could be one of the best investments people can make, especially if they are taking advantage of the new pension freedoms, but a lack of transparency on fees could put them off at the first hurdle.
“Good IFAs have nothing to fear by publishing fees online and we believe that if some firms can do it, then the others have no excuses. We need IFAs to be much more open about charges or the regulator should step in and change the rules.”
For more complex pensions advice, Which? found fees rising towards £7,000. It asked for advice on taking a 25% tax-free lump sum from a £150,000 pension, and then drawing the rest down through retirement. The average IFA fee was £2,516, but at one firm it rose to £7,000.
Unbiased.co.uk, which acts on behalf of 15,000 financial advisers, said that consumers should look at outcomes as much as costs. Karen Barrett, chief executive said: “We absolutely agree that people need to be aware of the costs of financial advice. What people then go on to discover is that the value of this advice is typically many times greater. We’ve been helping people to understand not just the costs but also the outcomes of financial advice, to enable them to make truly informed decisions.”
Its guide to costs suggests that the median fee for retirement advice on a £100,000 savings pot is £2,000.
