There is concern that people could be tempted to use the pension freedoms to access their pensions at age 55, without thinking through the longer term consequences, or falling prey to pension scammers out to rob savers of their pensions. Recent ABI research highlighted that, even before Covid-19, if the average amount that was being withdrawn from pension pots continued, many people risked running out of money in their retirement, without any other sources of income. Retirement income is likely to have to last for decades: a man aged 55 can expect to live, on average, for a further 24 years; a woman at the same age can expect to live, on average, for a further 27 years.
ABI is reminding savers during this uncertain time to:
-Think twice before taking money out of your pension if the rules allow it. Rather than deplete your pension, consider using other sources of income, such as cash savings if you can, as doing this will likely carry fewer long-term financial risks.
-Get authorised financial advice or guidance before you make any decision. If you are thinking about taking money out of your pension, you should contact Pensions Wise, which is part of The Money and Pensions Service. You can also pay an independent financial adviser who can make recommendations, based on your personal circumstances.
-Remember that pensions are typically invested in a range of assets, this means that, over time, their value can go up and down. If you are close to retirement and in a workplace pension, in most cases your pension will have been moved into less risky assets than shares, that will help cushion the impact of any falls in returns. All workplace pensions must have a plan for how they think customers will access their pensions, so speak to your provider if unsure.
-Beware of scammers. Pension scammers thrive on uncertainty and fear, so be on your guard. Do not respond to unsolicited phone calls, texts or online offers of pension reviews, and never be rushed or pressured into making any decision about your pension. If you are thinking about changing your pension arrangements, check the FCA Register or call their helpline 0800 111 6768 to check that the provider you are dealing with is FCA authorised .
Yvonne Braun, ABI’s Director of Policy, Long-Term Savings and Protection, said: “Rushed financial decisions are rarely the right ones, even at this worrying and uncertain time. Lockdown will not last forever, but the decisions you make today about your pension could impact on your standard of living for years to come. Now, more than ever, it is important to think longer term, consider your options, and seek advice and guidance - whether from the Money and Pensions Service or a financial adviser – before making any decisions.
“And don’t fall victim to scammers – shun any unexpected approaches; and remember: if a deal seems too good to be true, it almost always is.”
For further information on what you need to know about pensions and insurance during the Covid-19 crisis see the ABI website:
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