The pension freedoms, introduced on 6 April 2015, have given retirees a whole host of new options.
But, there is also a new set of risks for people to consider, as some decisions about how pension pots are used cannot be undone at a later date. Choose poorly and it could reduce the income you receive for the rest of your life, so it's vital to understand the risks involved as well as the benefits.
As part of that, pension providers will have a responsibility to ensure you get the right advice. Under rules set by the Financial Conduct Authority (FCA), providers are required to refer customers to the Government's Pension Wise guidance service, or to an authorised financial adviser. They will also have to detail to customers what the risks are of their chosen method for turning their pension pots into income.
And different options have different risks.
The main options at retirement will be:
In these guides, we outline the typical risks for you to think about for each option.
“The pension flexibilities may give retirees more options, but they're also very complicated, and it's important for people to think carefully before making any choices that they can't undo in the future. The Government's Pension Wise Service should be the first port of call for most people, and you may also want to seek independent financial advice to make the most of your income in retirement.”
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.