Wednesday, July 19, 2017
Pensions Freedoms - Don't Act Before Taking Advice
The FCA's latest report has highlighted the risks of accessing pension pots early without taking advice...
The interim findings of a review of the retirement income market by the Financial Conduct Authority (FCA) have revealed some significant changes since the pension freedoms were introduced in April 2015. One of the concerns highlighted is the increase in the number of people who now access their pension pots early, without taking advice.
Before the freedoms were launched there were restrictions and limits on how much people could take from their pension in any year. Now, since the freedoms, people aged 55 and over can access their pensions but those withdrawing large sums could incur a significant tax bill and face financial insecurity in their old age.
The FCA's report found that:
- accessing pension pots early has become 'the norm' - 72% of the pots accessed are by people under 65 and most are taking lump sums rather than regular income
- 53% of the pots accessed have been fully withdrawn
- drawdown is much more popular now with twice as many pots moving into drawdown than annuities
- 30% of consumers are now accessing drawdown without taking advice, compared to 5% before the freedoms
- those who access drawdown policies before the age of 65 typically stick with their current provider, rather than shopping around.
Separate research by the International Longevity Centre has found that those who received financial advice between 2001-2007 had accumulated "significantly more" liquid financial assets and pension wealth than their unadvised counterparts by 2014. It found the ‘affluent, advised' accumulated more in liquid financial assets than the 'affluent, non-advised' group and more in pension wealth.
FPC are specialists in retirement planning and provide tax, investment and estate planning advice to ensure that our clients make the right decisions. Pensions have become ridiculously complicated but that’s nothing new to us as we’ve been guiding clients through constant change over the last 30 years.