Pension freedoms and transfers: what you must consider

The introduction of pension freedoms has revolutionised the way that older generations can access their pots.

As growing numbers take steps to get their cash early, and more people begin to transfer out of their defined benefit pensions, are there too many options available to retirees? And what must be considered before taking action?

Since George Osborne introduced the game-changing legislation in 2015, those over 55 could access their funds like never before – and many have done just that. According to the Financial Conduct Authority, under-65s were accessing their funds more than any other demographic, accounting for over three-quarters of accessed pension pots.

Likewise, those belonging to a defined benefit scheme – a pension which pays out a set amount every year for the rest of the retiree’s life – are now able to transfer out for significant sums, trading a ‘gold-plated’ income for cash up front. As the pension deficit widens, more firms will be trying to convince their members to leave the scheme – in many cases, appointing their own advisers to achieve that purpose.

There’s one obvious similarity between these two pension issues: a distinct lack of clear information and informed advice.

Industry experts are growing increasingly concerned that the complexity of the pension system, coupled with an unprecedented level of choice, has led to many retirees making risky decisions which could potentially jeopardise their long-term financial future.

Before taking the plunge, those over 55 should consider their income up to the point of retirement and their predicted expenditure thereafter.

Do you plan on travelling the world, setting aside extra money for grandchildren or buying that motorhome you’ve always wanted? Lifestyle choices and financial circumstances must be taken firmly into account before accessing your pension.

Of course, the most important action you can take prior to any decision is seeking out independent, impartial advice.

At Wade Financial, we pride ourselves on putting our clients first, assessing your current financial situation and future lifestyle goals, as well as considering your preferred level of investment risk. Each client is unique, with different circumstances and different ambitions. To that end, no two financial plans are the same.

For a no-obligation chat about your finances and your future, get in touch with us via our contact page.