Following the Queen’s Speech, the world of pensions and retirement planning have again made the headlines.
The announcements in the recent Budget were game changing as far as pensions are concerned and whilst delivering greater consumer choice the changes came hand in hand with greater complexity and responsibility.
The at retirement maze was already difficult to navigate and the new choices and options double that difficulty.
There are many very good reasons for seeking impartial and expert advice at retirement including;
1 – Whilst taking your entitlement to a tax free cash lump sum is the usual first step, advice may well be required to invest that money and generate a sustainable flow of income from it;
2 – Currently there are a number of choices about what to do with the balance of the pension fund. Defer taking benefits, purchase a temporary annuity, purchase a lifetime annuity or utilise income drawdown – each has advantages and disadvantages and everyone needs to consider the suitability of their choice- an adviser can help you to avoid costly mistakes;
3 – If you have a lifestyle, medical or smoking history an independent financial adviser can shop around the whole market to find the most competitive enhanced or impaired life annuity for you;
4 – The current provider of your pension plan may offer you retirement choices but their offer may not be the most suitable for you and shopping around can make you better off financially for the rest of your life even after you have paid advisory fees. Alternatively your adviser might point out that you have special rates available from your current provider which might be lost if you moved your pension fund to a new provider;
5 – If you have a spouse or partner or even like the thought of the next generations benefiting from your pension fund engaging with a financial adviser can help to ensure that your loved ones are protected in the future in the event of your death;
6 – The at retirement choices are full of financial services jargon and your adviser can act as a translator ensuring that you understand what it is that you are doing. What do the acronyms OMO, GAD, GAR, SIPP, GMP and TFC stand for? If you don’t know then take independent financial advice;
7 – If you decide that from next April (subject to legislation being enacted) that you will take the whole of your pension fund as a lump sum, do you understand the income tax consequences of doing this? You will need to understand what the expression “marginal rate of income tax” means and an adviser can show you what this means to the £ in your pocket;
8 – If you do utilise the new “freedom and choices in pensions” changes how will you know how long your pension fund will last? An adviser will work with you to ensure that you use the pension fund effectively;
9 – If any part of your pension fund is going to be invested for the future how will you make sure that it is invested in-line with your appetite and attitude for risk? An adviser can work with you to build a suitable investment model and implement the right plan for you;
10 – At the very least even if you have already worked out for yourself what it is you are going to do, you might want to sense check it with an adviser. The independent financial adviser can help you to validate your own views providing a second opinion and challenging your thinking.
It is by no means all about “product” making the right choices at retirement will help you avoid costly, and lifelong, mistakes.
