Do I Need A Financial Advisor For My Pension?

Do I Need A Financial Advisor For My Pension?

It is easy for most people to see financial advice as an unnecessary expense when handling their pension. Whether you are just getting started in your career, almost retiring, or already retired, a good financial advisor can help you grow the value of your pension portfolio.

You can decide to manage your pension yourself. If you decide to go down that route, you have the flexibility to hold different investments in your pension portfolio. You need to be able to mitigate the risks that come with the investments you go for.

So, which is one is better?

What Should Necessitate Getting Pension Advice?

Generally, there is no harm in getting FCA regulated pension experts to advise you. You just need to ensure the charges are proportionate to the value of your portfolio.

In some cases, it is not a must for you to bring financial advisors onboard. There are various ways in which you could get free pension advice as well. You can access free pension advice through your employer’s pension scheme. If you are at least 55 years, you can get access to free and impartial pension advisors on The Pension Advisory Service.

That being said, some circumstances would make it necessary for you to bring pension advisors onboard.

Do I Need A Financial Advisor For My Pension

Let’s explore some of them.

1. Investing Your Pension for Regular and Adjustable Income
It is natural to want your pension to start generating income as early as possible. However, that means putting your pension pot under considerable risks. Keep in mind that there are applicable taxes when you are investing your pension. You need someone who can help you work around such issues, and still be compliant.

Take for instance defined contribution pension schemes. Such schemes allow you to access a 25% tax-free lump sum from your pot. The remaining 75% has to be invested in funds. The income you get from such investments will be taxed depending on the tax bracket in which they fall.

It makes sense to want to find the investment with the least risks and maximum income. Your investment strategy will also need adjustments so that it can remain in line with your objectives. A financial advisor will help you achieve all these objectives.

2. Adding Your Pension to Your Will
The pension freedoms of 2015 allow you to leave your pension portfolio to whoever you want to leave it to through a will. There are various regulation and tax implications that apply to pension portfolios when they added to a will or become part of your estate.

For instance, if you pass away before the age of 75, your beneficiaries, according to your will, can cash out your pension portfolio tax-free. Beyond the age of 75, your beneficiaries will have to let the pension remain invested if they want to inherit it tax-free.

There are other applicable tax obligations and implications that you might not be aware of. Working with a pension advisor will put you in a better position to ensure your pension funds are used the way you’d want them to be used even if you were not around anymore.

3. Merging Pension Options
Combining different pension options of pots comes with some implications. It can come with benefits or risks depending on how it is handled. For instance, if you have two pension pots, you might want to buy an annuity with one and invest the other one. You can also split your pension pot and buy an annuity with one part and invest the other.

The objective here is to grow the value of your pension pot(s), and possibly generate regular income. A financial advisor will help you explore the options available to you, and help you make the right decision.

It is important to have a financial advisor in the circumstances discussed above, but it is not a must.

Are there circumstances or processes that make it mandatory for you to have a professional financial advisor?

Yes, there is. Let’s explore some of them briefly.

A. Cashing in Your Pension
If you have a defined contribution pension pot that is worth £30,000 or more, you are legally required to get financial advice before cashing it in. The same applies when you want to transfer a defined benefit pension pot of a similar value to a defined contribution pension pot. The financial advisor is supposed to help you understand the implications of your intended action.

B. Buying an Annuity
Although it is not always mandatory to have a financial advisor when buying an annuity, it is very important to have one. You need one to explore your circumstances and find the most suitable annuity for you. They will help you get the best rate as well. Also, a lot of annuity providers will not give you a direct quote unless you have received professional financial advice


You always have the option to manage your pension portfolio, but unless you are an expert in pension investments you are prone to making mistakes. Some of those mistakes can be very costly. Getting professional pension advice saves you the worry. In the end, you’ll realize every cent you paid for the guidance was worth it.

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