“In our view there is a gulf between the perception and reality about how complicated the decisions are that people will have to make about what do with their hard earned retirement savings from April.
“There is a misconception that people will be able to treat pension schemes like bank accounts – drawing money as and when they please.
“This won’t be the case for two reasons. First, some providers won’t allow individuals to access their cash completely flexibly. And second, understanding the tax implications and charges associated with different methods of drawing on savings is incredibly complex. It’s very difficult to see how Pensions Wise will be able to effectively give people the support needed to understand these options and the tax implications of any decisions they make. People need access to better tools to help them understand their own personal circumstances rather than generic guidance.
“Making it mandatory for trustees to tell retiring members how to access Pensions Wise at least four months before they retire may seem like a good idea in principle, but in some cases trustees may wish to give more in-depth bespoke support to their members, and potentially advice. There is a risk that the advice they receive from a professional independent financial adviser which could be at odds with what Pensions Wise tells them.
“Another major issue is that people can begin drawing from their pensions from age 55 while still working. Pensions Wise is only there to provide support at retirement. There is a pressing need for support pre-retirement, so that people can appreciate the impact of withdrawals from their pension schemes – particularly in relation to when they’ll be able to retire with an income that’s adequate – and what levers they can use to get back on track.
“For the pension freedoms to be a success there needs to be much better guidance in place, both pre-and at-retirement, to ensure people don’t run out of money. Greater support is needed to help people make the right choices in the face of much more complexity. Low cost online tools definitely have a role to play.”
|
