Older savers are gearing up for the new pension freedoms coming into play in April, but the experts at JW Hinks lifestyle team think there could be some good reasons why leaving your retirement fund alone for the time being is a smart move.
Hundreds of thousands of people have been putting off the retirement until April this year – and with good reason.
From April 6, the government will unleash a set of reforms that will give pensioners unfettered access to their money.
No longer will they be forced into buying an annuity, which have been criticised for their poor value for money.
Instead the Chancellor, George Osborne, promised that pensioners could take as much as 100 per cent as a lump sum and use their pensions like bank accounts.
With these changes on the horizon, it’s easy to see why some retirees are chomping at the bit. But there are several good reasons why it could pay to hold off:
1. Free pensions guidance could be ‘shaky’
Fears have been raised that “Pension Wise”, the free guidance the Government has promised to provide all retirees with from April could be a shambles at first. This is because not all the call centre staff being hired to provide the guidance are highly qualified pensions experts
Once trained by one of a number of government run bodies including the Citizens Advice Bureau and the Pensions Advisory Service, the “advisers” will give half an hour guidance sessions to help them decide what to do with their pension.
Experts believe the guidance is likely to improve as the call-centre staff get more experience in dealing with queries.
2. Queues expected
“Pension Freedom” day falls on Easter Monday this year – meaning people trying to sort out their pension on April 7 will face huge queues on the telephone, as well as lengthy backlogs of paper forms.
3. Pension products maybe won’t be ready
Pension providers have only had a year to prepare for the changes, during which time the Chancellor has announced new details.Therefore it could pay to sit tight to see who’s offering what when things have settled down.
4. Pension sharks will be circling
At least £24bn of pension savings will become “accessible” under the new rules in April. The fear is unregulated firms selling “too-good-to-be true” investments can smell this cash a mile off. If lots of savers do get duped when the new pension freedoms come, the Government may do more to protect them against dodgy firms, so it could be safer to wait.
5. You could be taxed through the nose
Another reason savers are being warned to take their pension over a number of years is to reduce their tax bill.
Someone with a £20,000 income and a pension pot worth £30,000 would end up paying £4,553 in tax on their pension.
At JW Hinks, our Lifestyle Services team can provide a comprehensive retirement planning service to ensure you can enjoy a comfortable future. Contact us for more information.