Do your homework before choosing your pension options

26 Mar, 2015

The forthcoming pension ‘freedoms’ have been dominating the personal finance news over the last few months and as we approach 6th April it is important that customers understand their choices and what it will mean for them in retirement.

The most important thing to stress is that just because these sweeping pension reforms start next month there’s no need to rush in and make a decision that you may live to regret in later life.

Under the new rules, from age 55 you will be able to access all the money you have saved into your pension pot, and not have to buy an annuity. Options include: taking the whole or part of your pension pot as cash; keeping the money invested and draw a regular income from it, buying an annuity, or a combination of these.

Richard Jones, retirement director at Scottish Widows agrees and said: “Consumers aren’t being forced to make a decision on the 6th April.”

“For many, the appropriate thing to do will be to keep money invested in their pension pot while they think about the best choice and plan how to provide for the future they want.  For many people there is still a lack of understanding and certainty about what the changes actually mean and how they may affect their individual circumstances. We must collectively try to avoid the risk of people sacrificing long-term and hard earned savings for a short term need.”

I think although April 6 is seen as the start of a pension revolution, it shouldn’t be viewed as a deadline by which you must make a decision.

It’s important to check the details of your own pension plan(s) and get your head around your financial options in retirement.

To help you understand your options, and make the right retirement income decision I’d suggest a couple of websites which will help answer many of your questions and give you some useful pointers in this area.

The Government’s Pension Wise service  offers comprehensive guides and explains the various options as well as showing you how to avoid pension scams. It also offers you the choice to register your interest for telephone and face to face guidance.

Another useful resource is a refreshingly non-sales provider website that answers questions on the state pension, looks at how you’re taxed in retirement as well as some useful retirement calculators which may help you come to a decision that works for you.

It’s important to take time to consider carefully your options, particularly as rising life expectancy means we can expect a longer retirement.