It’s been a momentous couple of months for pensions. The goal posts been moved, the sport has changed and the shape of the ball has been switched. Are we ready to be more ‘hands on’ with our pensions?
The radical changes announced by George Osborne in the Budget will give pensioners much more freedom when they come to retire, with people now allowed to take their whole pension pot as cash, subject to taxation.
It’s likely that income drawdown will be the choice of many, with people gradually taking out retirement income each year, leaving the rest invested.The Government is guaranteeing some guidance to help you decide, but you may also want to take independent financial advice to help you make these complex decisions.
The hope is that with this greater flexibility at the end point, savers will become more engaged with their pension as it builds up and put more money in during their working life.
Taking control of your pension
Products such as self-invested pension plans (SIPPs) are set to become more popular as people seek to take more control of their pensions in an effort to produce a bigger final ‘pot’. Greater flexibility obviously demands greater responsibility to the individual.
Then there’s the fact that most of us will build up a number of different pension pots, often a mix of defined benefit and defined contribution schemes, as we move from job to job. Should we consolidate these various pots or might it be worthwhile to keep them separate?
Which? members have recently told us that 72% of them are in favour of people being able to do what they like with their pension savings, but 76% of those not yet retired indicated that they will need advice about what to do with their pension.
Are you ready to be proactive?
The phrase ‘the tyranny of choice’ might apply here – does the fact that people will have more options and greater personal responsibility for managing their retirement income potentially cause more problems than it solves?
The Government’s pension reforms could help people boost their retirement income by thousands of pounds. But with many unsure about how to get the most from their pension, and not trusting guidance from providers, it’s crucial that everyone involved – the Government, advice agencies, the industry and the regulator – put in place a consumer-friendly system that supports people to make the right decisions.
So do you feel that that you’re ready for the brave new world of self-investing of pensions, scheme consolidation and drawing down the right amount of money each year. Or are you concerned you’ll become unstuck without the right advice?
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