DIY Investor Magazine
/
2015 Issue
12
With the flexibility to use your pension pot in the
way that suits your needs to create better financial
outcomes for you and your family, comes the
responsibility to ensure that you achieve the income
you require without running out of money.
Those reaching age 55 can take 25% of their pension
pot tax free and then choose to either take the balance
taxed as income, purchase a guaranteed income for life
via an annuity or invest the remainder or all of their pot
and take flexible income.
These are not small decisions and there is no easy
answer or ‘one-fits-all’ solution, so it is important to
understand the options as each has its pros and cons.
You do not have to choose just one option and you
may find that a ‘mix and match’ approach is the most
appropriate for your situation.
Just because certain options exist, does not mean that
they are right for your individual circumstances – for
example, it is possible for those in a DB scheme to
cash in and transfer into a personal pension such as a
SIPP; however, the reason the number of DB schemes
is in steep decline is because of the relatively generous
terms they offer, so it would be rash to jump ship unless
a better income is achievable elsewhere.
The fact that many pension providers are unable or
unwilling to allow pensioners the new found freedom
to use their pension like a bank account has filled many
column inches as have the number of scams that have
been hatched by those seeking to lead the unwary
astray.
The fact that this survey highlights that awareness of
the Guidance Guarantee is so low should be of great
concern and the fact that those that have taken advice
appear to be better prepared for retirement suggests
that however die hard the DIY investor, it may be that
a sanity check with a professional will ensure that
everything has been considered – particularly if its free!
You do not have to choose just one option
and you may find that a ‘mix and match’
approach is the most appropriate for your
situation.
