Many people seek advice in preparation for retirement. Some can rely on competent and trustworthy people in their private circle. Others turn to their bank, their insurance company, their fiduciary, their financial planner or directly to their pension fund. The independence of the advice is essential for good advice!
If an advising person receives remuneration for selling certain investment or insurance products, conflicts of interest can arise. This is particularly delicate when the advising person benefits from you drawing your retirement assets as a lump sum and investing them in certain products.
Given such entanglements, the pension fund can be a safe point of contact. Pension funds guarantee a judgement that is independent and uninfluenced by product sales, as the law requires them not to operate for profit.
If the independence of the advice is not assured, conflicts of interest can arise. Where there is dependence, there is a risk that the lump-sum withdrawal is favoured over the retirement pension, because it opens up additional business and earning opportunities for the advising person.
Conflicts of interest can take effect on two levels. Firstly, there is the danger that the decision between pension and lump sum is not assessed exclusively according to your personal needs and goals. Secondly, the choice of investment or insurance products can depend on how attractive the remuneration for certain products is to the advising person.
Pay attention, therefore, to how your advice is remunerated and whether payments are disclosed transparently. Independent advice creates the basis for decisions guided solely by your interests.
Independent advice does, however, have its price and should be fairly remunerated. With supposedly «free» advice, the remuneration often comes indirectly through the sale of products or services. Transparency about the costs and the remuneration of the advice is therefore an important part of trustworthy advice.
Are there also arguments against talking to your own pension fund when planning your retirement?
It can happen that your pension fund, because of limited resources, can only provide a restricted information and advisory service. It is therefore best to clarify directly with your pension fund which information and advisory services are available to you.
The question is occasionally raised whether pension funds might favour certain forms of withdrawal in retirement advice. The background is that financing lifelong retirement pensions involves long-term obligations and higher risks for the pension fund than a lump-sum withdrawal. Such individual cases cannot be ruled out. The broad support for this information campaign from the umbrella association ASIP shows, however, that the vast majority of pension institutions are committed to informing and supporting their insured members in their interest. This attitude is also evident in the fact that these funds provide comprehensive information about the advantages and the value of the lifelong retirement pension.