When you’re approaching pension age, it’s likely that you’ll have plenty of decisions to make, and not least among those decisions will be how you should go about converting your current pension pot over to retirement income.
In this article, we consider why it is that you need pension advice and where it is that you can find it.
Pension Wise Advice – Why Do You Need Advice About Your Pension?
Unless you’re in the situation whereby you’re in a pension scheme (after you retire, your pension scheme will pay you a certain income which is related to your salary), chances are you’re saving in a pension scheme that will cater to a sum of money (otherwise known as a “pension pot”).
If the latter is reality, you need to make a decision about what to do with this pension pot so you have an income upon retirement.
Making a decision about what is right isn’t necessarily straightforward because there are many options.
Rules To Access Your Pension
In years gone by, after you’d retrieved the tax-free money from your pension pot, the remainder had to be used to invest in an annuity. This annuity would then provide a guarantee that you’d have an income for your remaining days.
Nevertheless, in April 2015, new rules were unveiled which in basic terms stated that upon reaching the age of 55 or above, it’s entirely up to you how you use your pension pot.
With that additional freedom, there’s additional choice and additional questions.
So, even while you may never have previously taken financial advice, now is a good time to begin.
What Advice Is Available?
If you do get advice, you should be aware of the type of service and type of advice you’ll get.
That’s because not all financial advice offers the same amount of protection.
When you get personalised financial advice, the person that advises will want to find out about you. Then, with this information, they will assess your current and future circumstances. After this, you’ll get a recommendation about what you ought to do.
Any recommendations made by the financial adviser must be suited to your needs. Otherwise, with legal protection in place, you’re at liberty to make a complaint about miss-selling to the adviser’s firm.
If for whatever reason, your complaint is not upheld, you can then take the matter further by getting in touch with the Financial Ombudsman Service.
Additional Choice, Less Risk
When you get financial advice from a professional, it’s not just that you have legal protection working in your favour. Financial advisers that provide personal financial advice are able to access a much wider breadth of choices than you could access without their input.
Additionally, professional financial advisers have qualifications and experience on their side.
You Get What You Pay For
As with almost every professional service, when you get financial advice from a professional adviser, you must pay for it.
You must be informed upfront about the cost of the advice and what the cost will cover.
When you use a qualified financial professional for pension wise advice, you’re paying for them to help you to avoid making potentially costly mistakes that sometimes can prove to be life-changing mistakes.
Even if you don’t seek professional advice, you may not, in fact, save money. That’s because broker and/ or other intermediary fees come into play – fees that are frequently far from obvious until you’re asked to pay them.
At a minimum, you should compare costs related to buying directly with the cost involved in seeking advice prior to making a decision.
How To Choose A Financial Adviser
Those financial advisers that provide personal financial advice about options at the age of retirement are classed as either independent advisers or restricted advisers.
The independent financial adviser (IFA) does not face any restrictions on the types of financial products they are able to recommend. Nor are they restricted upon the providers they wish to tout for.
On the other hand, some financial advisers can be restricted either in terms of the range of products they can offer or they may only have a limited choice of providers.
So, the key here is to ask your financial adviser if they cater to a “whole of market service”.
When an adviser can select from a whole of market service it means that they can choose from whichever service or product that is currently being recommended. Essentially, that means they have a very wide choice available to them.
As we’ve seen, if you are coming up to retirement and you’re not in a work-related pension scheme, it’s likely that you’ll have some key life decisions to make soon enough. And, if that is the case, it’s wise to seek professional pension drawdown advice – pension wise advice. Doing otherwise could prove to be a very costly mistake, and with U.K. laws now on your side, there’s even more reason to seek out a good personal pension adviser.