Reaching out directly to those at retirement
For those who are considering retirement or about to retire, it is crucial that employees have one-to-one support through financial guidance to help them understand their retirement income options. This also helps them to understand the pitfalls to avoid including the scams out there which particularly target this group.
Financial guidance will also help employees to understand the longer term consequences and the tax implications should they decide to access their pension early, whilst continuing to work, to support what may be a reduction in their household income during the coronavirus pandemic. By explaining other options, for example accessing taxable savings they may have or looking at what other support is available, including the coronavirus initiatives created such as mortgage holidays and debt deferral, it could help them to budget more easily which could benefit their retirement plans in the future.
For those about to retire with a DC pension, given the current turbulent market conditions, some may be tempted to cash out their pension completely. This needs careful consideration as there are serious implications of doing this such as potentially generating a tax bill and transferring from a tax free environment (the pension) into what may be a taxable environment.
Jonathan Watts-Lay, Director at WEALTH at work, comments; “Whilst retirement planning is important regardless of the climate, it is particularly crucial when stock markets are volatile. It is really important that employees don’t take a knee-jerk reaction and make poor decisions. After all, it could be a decision that adversely impacts their retirement income for years to come that they may live to regret”.