People now have more options and flexibility when it comes to their retirement plans, but making the wrong choice could prove costly.
The once rigid pension drawdown rules may have been relaxed but confusion is rife.
As a result, there is growing concern that many people are ill informed and won’t appreciate the implications of their actions until it’s too late.
The new legislation, introduced in April 2015, allows people in a defined contribution scheme to take a pension lump sum from the age of 55.
The first 25% withdrawn is tax free but it doesn’t all have to be drawn in one amount.
As well as taking some or your entire fund as a lump sum, you can choose to keep your money invested and draw an income or buy an annuity.
In the two years since the new pension rules were introduced, savers have already cashed in more than £11 billion from their pension pots.
The downside is that some will have received a nasty surprise when their tax bill arrived.
Speaking to an Independent Financial Adviser is a smart way to ensure pension tax is kept to an absolute minimum.
One of the other most common pension related mistakes is that people stick with the provider they’ve saved with all their life, not realising they can shop around to try and get a better monthly pension.
A key reason to seek professional advice is to consider all the pension income options and to ensure that your money doesn’t run out.
With people living longer and the danger of inflation eating into pension savings, understanding all the options is vital.
Having this increased choice and flexibility is all well and good, but without a helping hand many people will not make the best of the new opportunities.
Yes, there is a charge for financial advice, but in many cases you’ll get that back many times over and will sleep easier knowing that you’re getting the maximum benefit from your pension pot.
This article aims to supply general information but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek specific advice.