Thousands left in pension advice limbo

Since the pension freedoms announcement in the March Budget, we have seen sales of annuities drop by over half as consumers choose to wait to try and make the most appropriate decision.

Whilst the changes to pensions have been widely welcomed, it has created the problem that people are instead simply confused about their options. They have been told that alternatives exist and have therefore decided against immediately choosing an annuity, but they don't know what those alternatives are. Worse, the widespread reporting that the government is going to offer free advice from April 2015 has led to many choosing not to seek advice now. In reality, the government will be offering free guidance, which is generic, as opposed to regulated financial advice based on the specific circumstances of the individual.

The result of this is people holding onto their pension funds until next April, soon to discover that they aren't getting financial advice at all, but rather vague "guidance". If they want the tailored advice they expected, they will still need to talk to a regulated financial adviser for it.

Some providers appear to be trying to take advantage of this confusion by cynically offering non-advised drawdown funds, allowing retirees to crystallise their funds without taking advice or being made aware of the tax implications. Encouraging people to remove money from their funds without advice is fraught with risk, and the exact reason George Osborne has been keen to introduce free guidance as a basic security net.

The worst part of all this is that the majority of people do not need to wait at all to discover their new options. Pension release through income drawdown was not introduced with the recent Budget, and people are already able to take up to 25% of their fund tax-free from the age of 55. Anyone over 55 who is sure they want to remove some money does not need to wait until 2015 to do so. We are one of the country's largest advisers on income drawdown, and have been assisting people with it for years. We provide a free, no-obligation pension review that includes proper, regulated financial advice.

Call 0800 304 7288 for a friendly chat about your pension

Tax treatment depends on your individual circumstances and may be subject to change in the future.

The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article. For our latest information and news, please see our articles section: https://www.portafina.co.uk/whats-new

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