Changes to the retirement landscape and Pension freedoms have put a greater onus on people to keep themselves informed. Since 2015, the range of options when accessing their pension has increased. Little knowledge of the rules might mean making the wrong decision.<\/p>\n
Understanding retirement savings is critical for people over 40. The 2015 Pension Freedoms have given people access to pensions<\/a> from age 55. The reforms have given greater power over spending their retirement pots.<\/p>\n In 2015, new freedoms removed the need to buy an annuity. Income, as well as your tax-free cash, could be varied each year. Flexi-access drawdown<\/a> and UFPLS were introduced. Drawdown was previously restricted to wealthier savers. The removal of a 55% ‘death tax’ on pension<\/a> pots was also changed. Since then, more than \u00a335 billion has been withdrawn by 1.4 million people.\u00a0 These are figures based on HM Revenue & Customs data.<\/p>\n Pension freedom applies to people with defined contribution pension schemes, which provide a guaranteed income<\/a> after retirement. It doesn’t apply to ‘final salary’ or ‘defined benefit pensions’.<\/p>\n Analysis revealed that the number of new people reaching 55 peaked in 2020. The ONS has estimated that a consistently high number of 55-year-olds will retire, and this will continue from 2020 to 2026. The Government has introduced a revised state pension age of 67. Estimates showed 941,000 people turned 55 in 2020\u2014more than any other age group. Over the next six years, population estimates showed that those approaching 55 will exceed 900,000.<\/p>\n The (COVID-19) crisis has changed many people’s views on retirement. Just because you have the option to retire early<\/a> does not mean you should, and the government is considering encouraging people to work longer.<\/p>\n More people accessed pension funds<\/a> earlier than planned during the COVID-19 crisis. While this may solve a short-term issue, it leaves less of a retirement fund. Taking more significant amounts out of pensions also has tax implications, and it may be better to consider alternative options.<\/p>\n It’s always important to think ahead about retirement.<\/a> Even more so, especially since the COVID crisis.<\/p>\n The changes to the current retirement landscape and pension<\/a> legislation have introduced more choices. However, with more choices comes more confusion. The best option will vary for each person.\u00a0 The dilemma about how much income you can take is much more critical. Take too much, and you run out of money early. Take too little, and your retirement might not be as fulfilled as expected.<\/p>\n In the USA, retirees seem to take too much income from retirement. Whilst in Australia, too little is taken.<\/p>\n A good financial planner will help you understand the issues you face. They should also recommend a level of sustainable income.<\/p>\n Don’t rush into making life-changing financial decisions. Please get in touch with us to make an appointment if you require advice on pensions<\/a> and what is best for you.<\/p>\n Source data: NHS Covid Services<\/a><\/em><\/p>\nGreater choices and flexibility<\/h2>\n
Freedom numbers are set to rise.<\/h3>\n
Consider alternative options<\/h3>\n
Think ahead to retirement and plan for the future.<\/h3>\n