Pension flexibility in 3 easy steps

20th March 2015

It is likely that many employees are looking forward to the greater flexibility the new pension changes will bring in just a few weeks’ time but without the right financial education and advice, employees could be left incredibly vulnerable to making poor decisions. This is where WEALTH at work can help.

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 asked by those who are looking to retire and also by 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 recognise that their decisions 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, when retiring it is important to understand whether drawdown, annuity or a combination of approaches is 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 a lifetime annuity or perhaps phase how they take income whether that is through a more traditional drawdown strategy or perhaps just a simple cash drawdown facility. Whichever option or combinations of options are required at the point of retirement and beyond, it is important that employees know how to execute them. Particularly given the fact that post April it is more important that all savings are to be taken into account and not just pensions!

This is important as most employers are unlikely to be able to implement the new flexibilities directly, so employees will be left to either ‘do it themselves’ (very few employees are likely to be confident about this), or by using a specialist service provider, such as WEALTH at work who can implement each option based on employee needs.

Please see Pensions Insight for further coverage.