Pension freedoms: ensure you make the right choices
Are you being prudent with your wealth?
27TH NOVEMBER 2017
Since their introduction in 2015, pension freedoms have proven popular with the general public, as more retirees cash out their pots or move into drawdown.
However, with these new powers comes even greater financial responsibility – and recent evidence suggests that a some of those utilising pension freedoms are not being prudent with their wealth.
Parliament’s Work and Pensions Committee is currently conducting an inquiry into pension freedoms, and received worrying testimony from a welfare benefit officer, who stated that one retiree cashed out his £250,000 pension pot – only to squander it within months on gambling, alcohol and extravagant purchases, severely affecting both his short and long-term financial future.
That same officer cited another four cases where pension funds had been accessed using the new freedoms, only to run out of cash and be claiming benefits within months.
There have been concerns in some quarters that retirees could make the wrong financial moves now that the previous restrictions have been lifted, becoming more susceptible to scams, additional taxes and generally poor lifestyle choices.
That said, Parliament has also been presented with a number of success stories from the previous two years; some invested their pot in property, yielding a much higher year-on-year return than buying an annuity, while others have used pension freedoms to circumnavigate their way around potential tax traps.
The key to utilising pension freedoms in the best way possible is sound, impartial advice.
“We can’t stress enough how important it is to talk to independent financial professionals before making any decisions on pension pots,” says, Chris Breward, Managing Director at Wealth of Advice. “Accessing those funds – particularly from defined benefit pension schemes – is not the right course of action for everyone, but in the right circumstances, it can help provide for a bright financial future.”
For more information and a no-obligation chat about your finances, get in touch today.
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