Retirement – Freedom of Choice or More Complication

This is my recent quarterly Article which will appear within Ashby Life in the summer - comments about the proposed changes to Retirement Plans

Retirement – Freedom of Choice or More Complication

In our article in April’s Ashby Life we touched on the potential change suggested within the budget.  Because things are moving rapidly forward we here touch on some of the points raised.

In the March budget, Chancellor George Osborne announced plans to launch an impartial face-to-face guidance guarantee to every member of a defined contribution pension scheme at retirement.  Originally it was proposed this would be “advice”, but it is now suggested that the funding made available for this idea will not stretch far enough to cover the cost of advice.  Experts linked to the government like Ros Altmann have suggested the proposed one-off half an hour discussion or guidance would not be enough, why?  Well it never has when I have met anyone over the last 29 years.

It’s quite logical, this is a life changing decision, something which will affect someone’s life for maybe 20 years or so and also their partners, even the family.  I have met some people who say it does not affect me, I have a company pension.  Sometimes this is true, but I have found many times they still have to make decisions about how much cash they want to take from the scheme, in some cases they have made Additional Voluntary Contributions and were not aware they could shop around with the fund to source an income.

We think the proposed new Freedom and Choices at Retirement is great, it offers those retiring the chance to use their retirement savings as they consider fit for purpose, but with choices you need to consider the implications.  Retirement is often linked to having more time, more holidays, could you even plan one holiday in 30 minutes?  A one-off discussion with the same timescales is unlikely to be sufficient to plan your whole retirement.

Statistics keep tell us we are living longer, which is great, so if you do retire at 65 today then you may need to consider you need money for at least another 18 to 20 years or even longer.  If you get it wrong then it is a long time living with a wrong decision.

The consultation for the proposal made in the budget ended on the 11^th of June.  So we will soon hear more about how Freedom in Retirement will look post April 2015, but choices, amazingly we had choices for years.  Mr. Osborne has stated you will no longer have to buy an annuity, well this solution is only one of several options you have with a pension plan and an annuity may still be either a good option or part of an overall plan.  The most important point from my last sentence is the word ‘Plan’.

Our suggestion is do not just plan for the day you retire, have a ‘retirement plan’, you have earned it, so you need to enjoy it.  We have found the suggested changes has produced some discussions.  It has offered those who plan for Retirement and take steps to Save, greater options, but also it has added further layers of complexity.  The need for advice is even more relevant, we can only suggest you take steps and seek truly independent financial advice before you make any decisions.

17 Jun 2014

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