A new report issued by the UK union federation, the TUC, has stated that many thousands of people taking advantage of the new pension freedoms are not receiving proper advice before making a key decision that will affect them for the rest of their lives.
Under the 2015 pension reforms, individuals with state pensions now have a free choice of buying a traditional annuity, removing all or part of their pension fund in a lump sum, or drawing down a portion of the pension to live on while keeping the rest invested.
Across the spectrum, the defining similarity of these pension retrieval methods is this: people are doing it without seeking advice.
In all cases of cash lump sum withdrawal, pensioners were not seeking financial advice before taking the plunge. And even in instances where pension products such as annuities or drawdown policies were being purchased, there were still tens of thousands of individuals failing to take advice and likely failing to properly shop around.
With so many products available, people maybe throwing away thousands of pounds by simply choosing the wrong one. Indeed, the decision between annuity drawdown and lump sum is itself a huge deal that can lead to a better retirement or one filled with regret. No matter a person’s circumstances, it still makes financial sense to consult an expert.
Types of cash withdrawal since ‘pension freedom’ was introduced
|Type of withdrawal||Total||Unadvised||Period|
|Cash lump sums||300,000||300,000||April 2015-March 2016|
Figures from TUC
The TUC cites part of the issue as being the perceived cost of private financial advice, but at DPT Financial we welcome customers of all income levels, who will likely find the value of the advice they receive will far outweigh its cost.