The Financial Conduct Authority says that taking cash out of a pension before the age of 65 is becoming increasingly popular. This trend has unfortunately led to pension savers making poor and uniformed choices and even left them open to scams. MPs on the Work and Pensions Committee have launched a wide-ranging review into the retirement income market to look into this whole area.
The pension rules changed in 2015 making it easier for people to access their pension pots before the age of 65. With access to this money people have started businesses, helped out their children or invested in improving their property, which on the face of it could seem like a good idea.
The FCA say that most people taking money out of their pension before they are 65 are choosing to take lump-sums rather than opting for a regular income. The risk for these people is that they could be endangering their future financial security and could run out of money when they get older. They may also end up paying more tax. Another concern is that people are falling foul of cheats with bogus investments and pension-liberation scams with extortionate charges just two examples of this.
The Work and Pensions Committee is looking at ways of encouraging pension savers to take professional financial advice before taking decisions on their pension pot to ensure they get the best return for them. Pensions and retirement planning is not as straight-forward as it may seem to those who are not trained in this area. For example, people may not realise that they have choices, such as the right to shop around, they don’t have to take the pension option offered by their current pension provider.
We strongly recommend that you get some in-depth professional advice before you make any decisions regarding your pension!
The value of pensions and investments and the income they produce can fall as well as rise. You may get back less than you invested.
Tax treatment depends on individual circumstances. Tax treatment, rates and allowances are subject to change.
At Four Oaks Financial Services, our initial consultation is at our cost. Contact our Client Liaison Team on 01543 401029.
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