unbiased.co.uk’s top tips for ‘at retirement’ consumers

•    unbiased.co.uk and its expert panel of professional advisers offer their top tips following the pension changes announced in the Chancellor’s budget

To help consumers navigate the latest pension changes, unbiased.co.uk, the find an adviser search, has put together a question and answer guide for those approaching retirement, with the help of its expert panel of professional financial advisers.

Q. I am currently reviewing my retirement plans, what do I do now?
A. Unbiased.co.uk:
"It’s important that anyone reviewing their retirement plans speaks to a whole of market adviser to ensure they are getting the right advice for their particular circumstances and making the best decision for their retirement income, whether that is purchasing a financial product or taking a lump sum. The government’s changes to pension restrictions mean there will now be even more pension options available to consumers, which only a professional financial adviser who specialises in that area will be able to offer advice on. We know that advice can lead to a significant uplift in retirement income and better long-term outcomes. Deciding your income at retirement is one of, if not the biggest financial decisions a person will make in their lifetime."

Q. What do the Chancellor’s changes mean for my retirement income options?
A. Martin Bamford, Informed Choice:
“Other than a little more flexibility around income drawdown rules, nothing has fundamentally changed when it comes to retirement income options. It is still important to consider the full range of income options at retirement. For many people reaching retirement, a guaranteed annuity will remain the most suitable course of action. What counts is understanding all of your choices and options, as they relate to your personal circumstances and goals, and taking professional advice to make the most of your wealth in retirement.”

Q. I have a small pension pot – what should I do?
A. David Gibson, Gibson Financial Planning Ltd:
“Those with small pots of less than £30,000 should consider taking advantage of the increased limit in triviality, which will allow them to take pension pots totalling £30,000 as a tax-free sum.  
“People falling into this category who have annuitised in the past couple of weeks should seek advice immediately while they are within their annuity cancellation period.  Anyone who has annuitised in the last few weeks and who has a ‘cooling off’ period should consider whether they’d be better off deferring taking their benefits until next year, when the new rules allowing flexible access to their funds come into effect.”

Q. Should I just ignore the annuity option now?
A. Julie Wilson, Pen-Life Chartered Financial Planners:
“Despite the hysterics making the rounds following George Osborne’s budget announcement, that no-one will have to buy an annuity, if one has a cautious attitude to risk and a need for a fixed amount of income then annuities are just as relevant now as they were a few days ago.”

Q. Is an annuity right for me?
A. Kusal Ariyawansa, Appleton Gerrard:
“It makes perfect sense to analyse the options available. There is little point in locking your pension money at such low annuity rates when you will be able to take as much as you want (above the tax-free cash element) subject to income tax. It then becomes a case of comparing:
•    what income an annuity will give you
•    what you really need on a monthly basis
•    how much the fund needs to grow by each year in order to maintain your chosen income level

“Taking independent advice will be crucial at the start of your retirement process and on an ongoing basis, if you decide against the annuity option.”

Q. I’ve just agreed to an annuity and now I’m not sure – is there anything I can do to stop this?
A. David W Philips, Investment Service Ltd:
“If you have recently set up an annuity you should contact the provider or a regulated whole of market financial adviser as soon as possible. Some providers are extending opportunities for those decisions to be re-considered. Cancellation rights are being extended and some providers are offering, where possible, reinstatement of funds so that clients can take advantage of the new ‘freedom’ that the rule changes can bring.”

Q. Am I better off taking all of my retirement income at once?
A. Craig Palfrey, www.increaseyourpension.co.uk:
“The temptation will be there to take your whole pot straight away, but this may not be an ideal scenario for everyone’s situation. Your pension is designed to provide you with an income in retirement for the rest of your life, questions need to be asked such as where will my retirement income come from if I use my pension pot to pay off my mortgage. While we believe that people will be responsible with their pension; guidance and advice is now more essential than ever as there are more questions that need to be asked.”

Q. What about phased retirement?
A. Simon Webster, Facts & Figures Financial Planners:
“Given that uncrystallised pension benefits can be paid to a deceased pensioner’s beneficiaries tax free (and via a trust outside of an estate for inheritance tax purposes), phased retirement will become much more popular. Today many people draw maximum tax-free cash then invest it in ISA and taxable funds, then draw an income from that capital on top of their annuity. But from April 2015 money can be left in the tax-free pension pot and individual segments crystallised each year as necessary for both tax free and taxable cash as ‘income’ is required. The uncrystallised amount remains in a tax free environment.”

Q. I still have a few years to go until I retire – is it worth continuing to save?
A. Scott Gallacher, Rowley Turton:
“Subject to affordability, and being aware of maximum funding limits, people nearing retirement should consider significantly increasing their pension contributions, provided the new rules are introduced. In simple terms you get full tax relief on your pension contributions but, due to the 25 per cent tax free cash lump sum, you only pay three quarters of the tax when you take your pension fund monies. Previously there was a sting in the tail in terms of most people not being able to take the whole of their pension fund as a lump sum, however the proposed new rules mean that this should no longer be an issue. Failing to fund pensions now means you are likely to be missing out on free money.”

Q. Is it still worth saving into a pension?
A. David Penny, Invest Southwest:  
“Potential pension contributors of working age can now look at the decisions they will be offered at retirement and realise that they are attractive, flexible and reasonable. The enormous tax efficiency of saving into pensions for non-taxpayers, basic-rate taxpayers and higher rate taxpayers is without equal for the average person on the street.  Even bearing in mind the reform to ISAs, our calculations show that all kinds of taxpayer would be better off in retirement with pensions. The tax relief is that significant. In the case of a higher-rate taxpayer (becoming a basic-rate taxpayer in retirement) the uplift is 42 per cent over and above ISAs. It really is that beneficial.”

Notes to editors:

For more information contact:

Anna Schirmer / Emily Falla / Kate Aitchison: 020 7294 3682

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