With the pension reforms coming into place from April 6, many people are making plans to make full use of the new pension freedoms – but could these changes be putting your pension pot at risk?
What Are The changes?
From April 6, people reaching retirement age will have the option to spend their pension however they like. This means that the previous requirement to purchase an annuity with your pensions savings no longer applies.
Additionally, around 5.5 million people will be able to cash in their annuity and regain control of their pension savings as the prohibitively high 55% tax charge has been lowered.
What Does This Mean?
You could be planning to take advantage of this new right to spend your pension pot on a holiday away, you may wish to invest it, or even to purchase a different annuity.
Brian Milligan, Finance Reporter for the BBC, has anticipated that as many as 300,000 people will take immediate advantage of the new rules.
Whatever your plans, concerns have been raised about how safe this will really be. After the Chancellors 2015 budget statement which detailed these plans, the Citizens Advice Bureau raised concerns on their Twitter account that it is “important to ensure people have the right protection and guidance.”
Nicola Hartley, our Independent Financial Advisor based in Leeds agrees, “The main concerns are that pension savers could be at an increased risk from fraud and mis-selling by unscrupulous firms who have come into the market with the main aim of tagerting pensioners who have utilised their new pension flexibility rights and and have access to large sums of money.”
Nicola continues, “People need to remember that April 6 is not a deadline,the flexibilities come into force from this date but they are here to stay so there is no hurry to take advantage of this right straight away and risk making a hasty and uninformed decision . I would recommend that anyone considering accessing their pension benefits contacts an Independent Financial Adviser which will allow them to address their objectives and assess whether it really is in their best interests. “
Free guidance will also be available for all retirees from the governments Pension Wise service which offers advice over the phone from The Pensions Advisory Service, or advice face to face with the Citizens Advice Bureau.
Watchdog Investigation Into Pension Sales
In recent news we have also learnt that Watchdog are investigating claims that pension data is being sold.
The Daily Mail have said that companies are selling information on incomes, investment values and pension sizes for as little as 5 pence per person. The concerns are that this information will be used to target pension savers to reinvest their lifetime pension savings into products that are unsuitable and even fraudulent .
Nicola advises; “If you wish to take advantage of the changes,you could be dealing with very large amounts of money and you may be very excited to make plans or invest this. Whatever your plans are, make sure you think about them thoroughly and take your time. An individuals pension is typically one of their biggest assets, after their home, and you will have usually spent a large proportion of your life building up this wealth, to see it wiped out by income tax charges and possible uncessary purchases just so one can utilise these new flexibilities would be sad. It is important that people remember the key objective of pension saving: to provide an income throughout your retirement years.. Seeking advice from an Independent Financial Adviser f ensures that you get the right impartial advice and any good adviser will normally offer a initial discussion or meeting for free .”