Government urges pensioners to get financial advice
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The analysis highlighted that many British pension holders are in a bad position between not knowing what retirement options are available to them and being reluctant to take financial advice.
As many as eight million people are taking a DIY approach to their retirement, but are sorely lacking in knowledge on how to make their money last, avoid unnecessary tax bills or leave as big an inheritance as possible.
Pension holders have been advised against trying to navigate the daunting and complex pension system without consulting professional financial advice.
Clive Bolton, Managing Director of Savings and Retirement at LV=, said: “A DIY approach to managing large pension funds at retirement is fraught with risk.
“People can easily buy the wrong products, incur unnecessary tax bills or simply exhaust their retirement funds too quickly but an adviser will provide an impartial, cool-headed approach to their client’s finances and offer solutions that the client will not even have considered.”
Furthermore, a staggering number of people on the eve of their retirement have little idea about their options and what they mean for them. This is the case for more than one in five of those entering retirement in the next five years.
Different retirement options each have their pros and cons which can make a monumental difference in retirement so being ignorant of what they mean, or picking the wrong option can significantly reduce quality of life in retirement.
Mr Bolton said: “People have a series of big decisions to make as they approach the end of their working life and each one can make a huge difference to their retirement.
“For example, should they drawdown their pension in one go or over a period of time? Should they take their 25 percent tax free cash or leave the money in their pension fund to grow? Should they buy an annuity to guarantee an income for the rest of their lives or go for drawdown?
“These are questions a good financial adviser will help answer.”
There is particular urgency for people now to get ahead on thinking about their retirement options as doing so will put an individual ahead of the pack.
Only four percent of all pension holders say they know “a lot” about their retirement options in terms of buying an annuity or drawing down their pension.
But the LV= analysis showed that most people have the opposite opinion, as under a third of UK adults think people should see a financial adviser when thinking about accessing their pensions when entering retirement.
Unsurprisingly, the top reason for this among the most affluent individuals and everyone else is that they don’t want to have to pay for the advice and think it is too expensive.
Trust and value for money are also considerations which are preventing many from taking financial advice.
Mr Bolton finished: “People planning for retirement should think hard about what they want to do when they eventually stop work. It is helpful to have a good idea of the lifestyle you want, how much it will cost and how you are going to pay for it.
“Doing your research and taking financial advice is good way to guide consumers through their options and ensure they get the retirement they want.”
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