The date for the launch of the new pension freedoms (6 April) is creeping ever closer – but are you fully prepared for the choices that are about to open up? Well, according to research by TD Direct Investing, many of us feel ill-equipped to make wise decisions about our pension incomes, with only 54% of those questioned saying that they felt able to make the right choice.
The new pension freedoms will allow anyone over the age of 55 to cash in all or part of their pension, removing the obligation to purchase an annuity. The popularity of this measure is reflected by the number of people who plan to take this route – 40% of respondents said that they planned to withdraw all or part of their pension once the new rules are in place.
However, despite such a high take-up, 46% of respondents aged over 30 feel that they have not had sufficient guidance to make the best decision. This is a worrying finding as it could mean that some people are left without an income to last for the whole of their retirement.
Other findings from the research revealed that confidence in the pensions industry was starting to falter, with almost half (48%) of survey respondents declaring that they did not trust the pensions industry. With confidence on the wane, directing people to the guidance and advice they need to secure a comfortable income in retirement could be an even trickier challenge.
"It is clear that there is a real need for unbiased and coherent support for pension holders," commented Carl Howard, commercial director of TD Direct Investing. "If this worrying divide between the UK's savers and the pensions industry means that people are not making the best decisions for their financial futures, then we need to work together with the Government to solve this."
In contrast to the falling confidence in the pensions industry, assurance in the property market seems to be growing. In fact, 50% of respondents believe that their property will support them in later life, with those living in London being particularly confident (60% of Londoners expressed this view).
However, while equity release and property investment are certainly forms of income in later life that are growing in popularity, putting all your eggs in one basket and relying upon them at the expense of pensions or other traditional savings could be a risky strategy. Carl Howard explains: "It's easy to become blinkered when considering long-term source of income. This is where the investment industry has an important job to do in educating the investor on the range of choices available and supporting them in making their decisions."
If you're approaching retirement and you're one of the many people who are feeling unsure about which decision will be the best one for you, then it's time to get informed.
The Government's free guidance service, Pension Wise, can start you off on the right path. Guidance will be available by phone, face-to-face and online, and it can help point you in the right direction. The next step will be to consult a qualified financial adviser – they will assist you in drilling down the options to give you the best outcome. You can also consult our pensions guide and our annuity planner to start getting an idea of the choices out there.
The pension reforms are on their way, and by getting the right guidance and support, you can be prepared to meet them.
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