Posted on 18 October 2016
It is now over a year since the introduction of the pension ‘freedoms’ in April 2015. The changes gave anyone over the age of 55 the ability to withdraw as much money from their pension pot as they wished, subject to income tax. The Department for Work and Pensions (DWP) introduced the reform to endeavour to make pension saving easier and clearer for the individual, with the hope that everyone will have a financially secure retirement.
The changes have not been without their critics, with many raising concerns about how many people had been left to ‘fend for themselves’, in what is acknowledged as a complicated and potentially expensive market. Further concerns have also been raised about the increasing number of pension scams that seem to be emerging and targeting the more vulnerable population.
There is free help available through the government information sites. The Pensions Advisory Service and Pension Wise offer free guidance online with the option for an individual to make an appointment with an advisor for further advice. The question that is being asked is whether the general public are aware of these sites?
Research by the TUC discovered that only 15% of those setting up a drawdown policy received official help, whilst 73% of those buying an annuity (an income for life) did consult a financial advisor. The perception that seeking financial advice, through a qualified financial advisor, is an expensive process is partly to blame for the increase in the confusion as to what is the best option for the individual and the number of reported ‘mistakes’ made in this area.
However, the cost implications of not seeking financial advice from a qualified advisor, whether that is through one of the government helpdesks or through a private advisor, could be critical to providing for a healthy retirement financially. The number of considerations on what scheme is going to give the best return, what type of scheme best fits the desired lifestyle and what tax implications those schemes may have is vast.
It is always recommended to seek professional advice when planning your retirement and how best to invest your pension pot, whether that is a private advisor or through the free guidance sites. One thing is clear, the approaches to either should be made by you and not through an e mail link sent to you or cold call!