Here at Brunsdon Financial it’s no secret that we strongly believe in gaining sound financial guidance before making any decisions involving your money, particularly when it comes to your pension.
However, that doesn’t seem to be a top priority for everyone. A new study conducted by NerdWallet of 1,612 UK adults over the age of 55 with a workplace or private pension found that the majority of respondents were not seeking advice regarding their retirement planning. This is despite pension freedoms being introduced over six years ago.
What are pension freedoms?
The Pension Freedoms legislation, released in April 2015, allows consumers to flexibly access their defined contribution (DC) pension pots from the age of 55 to enable them to use the funds for a wider range of options, including cash withdrawal or retirement income products.
This age will change slightly in the future as it’s the Government’s intention that the minimum age you can access your pension savings will be 10 years before your State Pension Age. Therefore, by 2028 this will be 57 and by 2039 this will be 58.
Prior to this, there were rules surrounding the tax-free withdrawal of money from a pension pot, namely that only 25% could be taken upon retirement age with the rest needing be taken as regular payments for life to avoid tax penalties.
But for the last six years, there has been greater flexibility on releasing pension funds from the age of 55 upwards. However, does that mean you should go ahead?
Lack of advice sought
The best thing to do would be to speak to a financial adviser. However, this latest research indicates that only 16% of respondents aged 55 and over have sought out independent financial advice for their retirement planning.
This is in stark contrast with 75% of those surveyed who said that they do not feel confident enough to organise their retirement planning without seeking professional advice.
When it came to making use of the Pension Freedoms legislation, only around one in 10 participants said they had removed money from their pension to put into a savings account or cash ISA. A further 9% have taken money from their pension and deposited this into a stocks and shares ISA, with 8% having withdrawn from their pension to invest in property.
What the data doesn’t show is whether these decisions have been taken on or against the advice of a financial planner.
However, the number of respondents stating that they had not spoken to a financial adviser regarding their future plans highlights a need for many people to start and maintain an open dialogue with a financial adviser as retirement draws close.
What should I do?
If you want to learn more about what actions you can take with your pension, it’s best to seek professional advice.