Should I seek regulated financial advice before accessing my pension?

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In 2015, Former Chancellor George Osborne announced the biggest change to the UKs pension system in decades with the introduction of pension freedoms.

Pension freedoms enable members of defined contribution pension schemes to access their savings early from age 55. There is no requirement to use their pots to purchase an annuity and instead members have the choice to do what they want, including withdraw the funds or use drawdown options to stay invested while taking an income from the investment.

 

Before pension freedoms the traditional option was for workers to convert their defined contribution pension pots into secure income with the purchase of an annuity contract. These contracts, offered by insurers give retirees certainty with a set guaranteed income, often for the remainder of life. Although annuity contracts can still be an important part of retirement planning for some clients there has been a decline in popularity.

 

Falling interest rates have eroded the amount of annual income a pension pot could buy. Often the best annuity rate is on a ‘single life’ basis which means that the annuity provider keeps what ever may be left of your pension with no further annual income payable to your family.

Pensions freedoms allows you to tailor the level of income you take from your pension through retirement, this can mean any residual funds on death pass on to your family. As a result, more and more are opting for the flexibility of drawdown pension arrangements.

 

Concern with the level of ‘DIY’ drawdown arrangements

Since the introduction in 2015, the latest figures from HMRC show that the total value withdrawn from pensions exceeded £42 billion. These figures speak to how welcomed the changes have been which has led the Financial Conduct Authority, (FCA) to form a Retirement Outcome Review. Initial reports have raised concern with the level of ‘DIY’ drawdown arrangements as more and more over-55’s have entered into drawdown on a non-advised basis.

Interim reports showed that most non-advised drawdown customer did not shop around for drawdown products, some did not have the understanding to make informed investment decisions for their drawdown product. This led to many funds remaining in cash or other low interest type investments which will impact the future sustainability of the funds to provide income through retirement.

 

Unfortunately, there is no one size fits all solution and the approach of drawdown may vary for someone who has several pension pots and other assets for income though retirement, against someone with a single pot.

Regulated financial advice can ensure that pension scheme members are fully aware of the risks involved with accessing pensions and if deemed suitable, provide appropriate investment strategies within drawdown to help build better outcomes for their future.

 

Before deciding on any option over your pension

It is important to seek the appropriate advice from a regulated financial adviser to help you make better decisions. In the first instance you can seek guidance from the government service ‘pension wise’ by visiting www.pensionwise.gov.uk.

 

Should you wish to speak to a regulated financial adviser to hear how we can help you with your retirement journey, get in touch with us at Beesure today, visit www.bee-sure.co.uk or for more information on pensions & retirement planning click here.

 

Written by Alex O’Neill DipPFS, IFA at Beesure Ltd

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Please note we have not provided any advice within this article.,

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