AXA - Be Life Confident

Face-to-face advice leads to greater understanding and encourages long-term savings

People in ten households taking part in a unique financial social experiment will each receive £3,000 a year more in retirement after meeting regularly with a financial adviser.

Prior to taking part in the experiment, which is run by insurance giant AXA, participants could expect to draw only £11,800 per year for their pension - or just £226 per week. But after just three hour-long consultations with an Independent Financial Adviser (IFA), each household can now look forward to a pension of around £14,900 - or £286 per week.

The face-to-face time with an IFA has allowed participants to develop a greater understanding of the levels of income they can expect in retirement and has encouraged them to allocate savings to their long term financial future instead of focusing on short term financial needs.

Three participants have joined company pension schemes for the first time despite them being eligible to be members for several years. In all three instances one of their reasons for not joining was poor cash flow and also a lack of understanding of the company scheme benefits available to them. Two participants have increased their contributions to pension arrangements due to improved cash flow and an improved understanding of how the extra contributions should lead to extra pension income in retirement.

Saran Allott-Davey commented : "Generally our AXA Avenue participants were very focused on their short-term financial needs while vaguely worrying about the long term. They didn't have any clear idea of their expected pension benefits or what actions they could take to improve them. Pensions provision is a very complex area and my face to face time with the participants has been invaluable. It has resulted in clear benefits to five of our ten participants who now feel less worried about their long term financial future and more able to plan effectively."

"Advice focused on improving cash flow to ensure the funds were available for them to make the required contributions. We also took the time to explain the generous level of employer contributions and the long term benefits available to them if they were to join the scheme."

Three participants are still not able to make any significant improvement to their anticipated pension income, either because they are very close to state pension age or because their short term cash flow and short term debts are in a very poor state.

Saran Allott-Davey compiled a combined annual pension income forecast, for both groups involved in the year long experiment: the 'active group' who had been receiving advice, and the 'control group' who have been left to their own devices.

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Combined annual pension income (based on pension forecasts generated by Saran Allott-Davey:

Active Group

Average forecast pension income at the start of the experiment = £11,823 pa

Average forecast pension income as at September 2006 = £14,924 pa

Average pension increase per active household since start of AXA Avenue is £3,100 per annum.

Control Group

Average forecast pension income at the start of the experiment = £8,756 pa

Average forecast pension income as at September 2006 = £8,756 pa

Average pension increase per control household since start of AXA Avenue is £0 per annum.

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At the start of the AXA Avenue project the majority of those ten households who have been receiving financial advice had inadequate pension provision. Nine months later five of the ten have made positives steps forward and a further two are likely to within the next six months.

Saran Allott-Davey concluded; "I believe that the 10 households in the active group are likely to be representative of the nation as a whole and that in a great many instances people could make small improvements to their monthly budgeting to free up money to divert to long term savings to radically improve their potential income in retirement."

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