People who have come to their retirement age or wish to take benefits from schemes such as personal pensions have various options. Many clients opt to take monies flexibly, however, is pension advice always on the list of requirements?
Former Pensions Minister Ros Altmann explained in a recent interview.
“It is really vital that people considering moving their pension into a drawdown fund check all the charges first, I would recommend everyone to call Pension Wise. The government has set up this free service to help clients understand pension choices and explain the risks of different options’’
The value of the pensions and the income they produce can go down as well as up and you may not get back as much as you put in.
However, figures show that some six in ten people using the reforms to treat their funds like cash machines are being rolled on to their existing provider’s deal rather than shopping around, according to the City watchdog.
Experts warned that this means many are not getting the best deal, and are being hit by fees far higher than necessary. This is because in most cases, insurers offer to move savers’ cash into a small range of investment funds - unless the customer makes a special request.
But few savers realise there is a huge difference between the charges on the cheapest and most expensive plans on offer. The difference in charges may not look big, but over time can eat away at your pot.
Recently a spokeswoman for the Department of Work and Pensions said:
“Pension freedoms give people choice over how they use their hard-earned savings, but it is important that they are aware of any charges and the tax implications, we introduced a cap on early exit charges to ensure people are not forced to pay higher than necessary penalties for accessing their own money.”
Pension Wise: offer client‘s who wish to have further advice on their pensions the option of a local Financial Adviser who can cast a professional eye on the plans. In real terms a fee may be charged but it could save money in the long run.
This type of account is called a stocks & shares ISA, where you can invest in funds (shares or bonds from various companies pooled into one investment), bonds (basically a loan to a company or a government), and if needed shares in individual companies.
Stocks & shares ISAs are typically managed by an online service (often called an online broker or platform), fund management group or fund supermarket.
The value of the investment can go down as well as up and you may not get back as much as you put in.
If you wish to open a stocks & shares ISA, you need to be aware that many of these companies charge a fee for you to open and hold a stocks & shares ISA. Some even charge you if you want to change any of your investments, withdraw your money or move it to another company.
Some stocks & shares ISA providers may allow you to hold some of your allowance as cash within the stocks & shares ISA. But you're free to open separate accounts if you prefer.
In the tax year 17/18 the current ISA allowance is £20,000 and will stay the same in 18/19 tax year. This makes a worthwhile tax efficient incentive that can be totally invested in stocks & shares or split into a cash ISA account.
The process of investment must be done with care.
An online process can offer guidance; however, a local Financial Adviser will be able to give professional depth to the initial and ongoing investment strategy.