When should you pay for advice? - pension planning

So you've got a financial decision to make, but should you pay for advice or go solo?

Which route you take will depend on your confidence with money matters as well as your specific needs – for example, whether you need to sort out a tax problem or just want to set up a regular savings account.

Charges for financial advice should become clearer from January next year, following changes known as the 'retail distribution review' or the RDR. From then, you'll face an upfront fee from independent financial advisers if you do decide to seek their help.

But how do you know when it's wise to pay for help? Here are some key financial milestones and guidance on whether you can do it yourself or need to call in the experts.



Getting a retirement plan in place is often a simple case of choosing a personal pension with low charges, and there is an array on offer from well-known providers such as Scottish Widows and Aegon. It's easy to apply for one online and do the basic research yourself.

And if you want to take charge of your own pension savings, rather than simply hand your money to an insurance company, you might opt to start a self-invested personal pension (SIPP).

However, if you're new to investing you might want to get some expert advice when it comes to choosing the funds for your portfolio.


This financial decision typically affects savers with sizeable existing pensions accumulated through a company scheme, for example, or with several pension pots. In this case, getting an adviser to work through the situation might be sensible.

"The key is to check exit and entry costs, and any benefits that might be lost," says Lowcock.


These are what you trade your pension pot in for when you retire to produce an income for the rest of your life. It's a large one-off transaction, about which you can't change your mind, so getting it right is crucial.

"An IFA can help you decide how best to arrange the annuity: spouse's pension, guarantee periods, increasing or level payments, frequency of payments - all of which can affect the amount you receive," says Francis Klonowski, IFA at Klonowski & Co.

Find the best annuity rate for your circumstances

Why can I no longer get 'free' advice?

There are currently two ways of paying for financial advice – an upfront fee or commission.

Commission has enabled advisers to seemingly act on a 'free' basis for clients, with charges then deducted from investors' funds each year – eating into returns – or added to premiums. This makes it difficult to gauge the real cost of advice.

Analysis by the Financial Services Authority (FSA) suggests consumers were losing £43 million a year because of advisers, driven by commission, encouraging them to switch pensions.

As a result of the controversy surrounding 'commission bias', from January 2013 customers will instead be charged an upfront fee. These changes are designed to make the cost of advice more transparent and help consumers have a better understanding of what kind of service they are being offered.

It will be important that you ask and agree what the fee will be upfront, and exactly what it covers. For more information, see the FSA's guide to financial advice changes at fsa.gov.uk.