We have written quite a few articles about pensions. Hopefully we’ve highlighted the importance of seeking advice as part of the pensions process. Everyone is going to need to access their pension sooner or later. Whether you’re approaching your retirement, or if it’s still a decade away, the more informed you all are about it, the better!
It seems, however, that quite a few retirees are failing to get the advice they need to make the best decision for their future. Saga recently polled 2,000 UK adults. They discovered that one in seven retirees (14%) have accessed their pension pots without financial advice.
Considering HM Revenue & Customs say £23.6 billion has been accessed by savers since the pension reforms, Saga worked out that the amount of money these 14% of pensioners withdrew equated to £3.6billion. That’s a lot of money.
When asked where they got their advice from, one in ten of those polled relied on advice from friends, family and colleagues rather than financial professionals. Even more eye-opening was the fact that 12% would not take any advice at all!
Why aren’t people seeking advice?
Financial advice is sometimes seen as an expensive luxury. Something that only those who are more financially secure are able or willing to pay for.
However, getting professional advice (from a good adviser!) is worth it in the long run. More often than not, individuals will end up saving more than the advice is costing them. It’s very likely to lead to a more financially secure future. Exactly what you want for your retirement. The knowledge that you are able to enjoy your retirement years, not spending them worrying about money, is worth more than any amount of money can buy!
The importance of seeking pension advice
There are a lot of big decisions to be made when considering retirement. First, you need to know whether you can afford to retire. Then you need to choose how your pension pot will provide an income for your retirement.
Thanks to the pension freedoms introduced in 2015, there is more flexibility than ever when taking benefits from your pension fund. Some are straight forward. Some are a little more complex. Working out which option suits you best could prove to be a little overwhelming.
If you don’t know what you are doing, it’s so much easier to make mistakes.
The Financial Conduct Authority (FCA) has found that around 33% of those who did not take advice only had their funds in cash. Financial advisers will usually recommend investing money too. The problem with cash is that it gets eaten away by inflation over the long term, rather than producing what we call a ‘real return’. Once the pot is depleted, the only way to make more would be to go back to work.
If you do get things wrong, you could be in for a tough retirement. In the worst case scenarios, you might run out of money altogether and find yourself having to sell your home or rely on the rather meagre state pension.
These are the very reasons solid, professional advice is vital. Planning for your retirement will help to avoid getting in a muddle!
Get advice sooner rather than later
Retirement planning is a two-stage process:
Stage 1: Building up your retirement fund.
Stage 2: Taking an income to replace your earnings.
The sooner you take a look at your finances and start making your money work for you, the better. Don’t wait until you want to access your pension to seek professional advice.
Ultimately the best way to know whether you will be able to retire when you want to, is to regularly review your finances. Seeking advice from an independent financial adviser allows you to do just that.
Ongoing pension reviews
The main aim of regularly reviewing your finances is to ensure your money is working as hard as it can be for you, and to prevent yourself from getting into financial difficulty in later life. It allows you to take into account the amount you currently have and compare it to the amount you expect to need for a comfortable life as a retiree.
In addition, ongoing reviews should help to avoid shortfalls. Or should a shortfall be identified, it will give you time to do something about it.
Sometimes, simply finding out how much money you have can be a difficult task. Chances are you have had a number of jobs over your working life. This could mean multiple pensions. Our financial advisers will review all of your pensions, allowing you to see the whole amount of money you currently have in your retirement pot.
During our pension review process, your adviser would also make sure that your money is working as hard for you as it can, providing a stable outlook for your financial future.
Knowing your end goal is easy. Getting there can prove to be a little more difficult. This is where our Cashflow Planning service proves to be a very useful tool.
With cashflow planning, we will take a look at your current financial situation. We will then use this information to present you with a number of options which will get you to your desired end result.
You get to choose the option which will work best for you, helping to plan ahead and reach a stage where you can enjoy your dream retirement.
Can we help you?
Choosing your pension product is a big decision. It, therefore, makes sense that you receive advice from a firm who you feel confident with.
Here at Face to Face Finance we pride ourselves on our independent and friendly service. Get in touch with us if you would like to book an appointment to speak about planning for your retirement. We can visit you at your home or you can pop into the office to meet our team.