When I wrote How to Take Your Pension Pot – A Practical Guide to Your Retirement Options my aim was, perhaps surprisingly, not to provide all the answers.
What is right for one pension pot owner is possibly not right for another. Individual circumstances will determine the best course of action.
Instead my aim was to provide all the questions.
In fact I believe that there are 40 questions that the pension pot owner needs to ask themselves, their pension pot provider and their Financial Planner (if they choose to use one).
I have selected from those 40 questions what I consider to be the most important 5 questions for pension pot owners:
1 – How long do you expect to live?
Underestimate the answer to this question and, with some of the retirement income options available to you, you might well run out of money before you run out of life.
We have recently carried out an extensive survey asking people to estimate their life expectancy. Results of that survey will be published by Martin soon (and from a sneak preview I have seen absolutely surprised me!)
2 – What will you do if you spend your pension pot too quickly and run out of money later on?
This question obviously follows on from question 1. Will you have to dramatically change your lifestyle if you spend your pension pot too quickly? Or does it really matter?
Perhaps you have a Financial Plan that says you can spend all of your pension pot as quickly as you wish to because you have other financial resources for later on in life
3 – What other income will you have in retirement?
Perhaps you have an ISA or an investment portfolio or perhaps a buy-to-let property generating rental income. You really shouldn’t make a decision about what to do with your pension pot in isolation from your other finances.
You may have a State pension and perhaps a guaranteed pension from a previous employer’s pension scheme in which case you may have greater choices available to you.
4 – Do you need a guaranteed income for the rest of your life?
If you do then as unpopular as they appear to be, an annuity may well be the right choice for you.
Low annuity rates, the prospect of not getting all of your money back and perceived poor death benefits for survivors have all been given as reasons for not buying an annuity.
A guaranteed income for life on the other hand is an insurance policy against “living too long”
5 – Do you understand all of your choices and options?
Some of the decisions you have to make about your pension pot are irrevocable. Make a decision in haste and you will have a lot of time to regret it.
My advice is don’t make any decision about what to do with your pension pot until you understand the advantages and disadvantages of each choice.
From 6th April freedom and choice in pensions introduces some radical changes to the way the pension pot owner enjoys their benefits.
How to Take Your Pension Pot – A Practical Guide to Your Retirement Options is a book well worth reading before you make your decisions.
