Three steps to greater pension flexibility

9th February 2015

Jonathan Watts-Lay, Director, WEALTH at work, comments in Pensions Expert in regards to the three steps to greater pension flexibility.

“The pension changes come into force in April, removing many restrictions on how defined contribution (DC) pensions can be taken from age 55.

This greater flexibility is fantastic news for savers, but without the right financial education and advice, employees could be left incredibly vulnerable to making poor decisions.

We believe employees will typically have 3 key questions;

Firstly, employees will ask – ‘What do I need to know and what are my options?’

This question could be from those who are looking to retire but also from those wishing to carry on working but release some cash.  Financial education is key to help employees understand the advantages and disadvantages of all options.

Secondly, employees will ask – ‘Okay I understand the options now but what is right for me?’

This question may arise as employees realise that their decision will have many implications ranging from the tax payable on any withdrawals, through to broader considerations such as how to generate retirement income from the range of pensions or savings (such as ISAs) they may have and indeed potentially those of a partner. Equally, if they are retiring it is important to understand whether drawdown, annuity or a combination of approaches are the most appropriate way to generate income in retirement. Both helpdesk support and fully regulated advice offering consumer protection are of utmost importance for the employee at this point.

And finally, employees will ask – ‘How do I implement my chosen plan?’

Employees may be making a single decision such as taking an annuity or perhaps phasing retirement or indeed wanting a simple cash drawdown facility. Whichever option or combinations of options are required not just at the point of retirement but indeed throughout retirement, it is important the employees know how to execute their chosen option(s). The key point here is that employers may not be able to implement all options so employees will be left with either the DIY approach (likely to be disastrous given the mis-buying when many only had annuities to choose from) or a service provider, such as WEALTH at work  who can implement each option based on employee needs.”

Please click here to view Jonathan discussing the impacts of the new regulations with the Business Reporter.

To find out how a ready-made solution could help please click here.

For further information please contact us now.