10 Sep 2019

Five top tips for those considering using their pension freedoms

Five top tips for those considering using their pension freedoms

More than one million people in the UK have now taken advantage of the pension freedoms – getting greater access to billions of pounds of their savings.

And insurer Aviva says that this year and next will see those born at the very peak of the post-war baby boom in 1964 and 1965 reach 55.

More than 933,000 are set to hit 55 this year, and 942,791 in 2020 - and, at that age, they will enter the arena of the pension freedoms.

Aviva says the number of people celebrating their 55th birthday in future is never again projected to be this high.

Alistair McQueen, head of savings and retirement at Aviva, said: "Since their introduction in 2015, more than one million people have taken advantage of the pension freedoms, withdrawing more than £28billion.

"The latest population data suggests the pension freedoms are about to witness a decade like we may never see again - as 9.2million reach their 55th birthday by 2029.

"With this greater freedom to access finances comes much greater responsibility to make informed choices to ensure that the money lasts throughout retirement.

"We'd encourage people to engage with their pensions early and seek out as much information as possible before committing to a particular route."

Five top tips from Aviva if you are considering using your pension freedoms:

  1. Take your time: You could have been saving into your private pension for more than 30 years. Don't rush into making any decisions. It's a big decision and you may not be able to change your mind.
  2. Understand your options: The pension freedoms typically allow you to access your private pension savings from age 55. You can usually withdraw all, some or none of your savings. Age 55 is the date from which you are eligible to access your private pension savings, but there is no need to act at that age. Indeed, the longer you wait before accessing your savings, the more you are likely to have available in later life.
  3. Get free help: The UK Government recognises that deciding how to use the pension freedoms could be confusing, so it has established a free service call Pension Wise to help you understand your options. There have been more than 8million visits to www.pensionwise.gov.uk since launch.
  4. Avoid unnecessary tax: You can typically take 25% of your pension savings tax free, but after that, income taken from a pension is taxed the same was as any other income. The rate at which you take your pension savings will have implications for the amount of tax you may have to pay. Bigger withdrawals are likely to attract bigger tax bills, so withdraw with care and consideration.
  5. Shop around: You may have saved with one company for many years, but there is no need to stay with that same company when you are using your pension freedom monies. If and when withdrawing some or all of your money, shop around to consider new homes for your savings. This could make a big financial difference over the following years.

Speak to an expert

Following sweeping pension reforms in 2015, there is more scope than ever to arrange your finances the way you want them.

That flexibility is great, but there is a lot to weigh up when considering whether to touch your pension. It may be in your best interests to stay in your defined benefit scheme - obtaining professional advice is therefore crucial.

Aberdein Considine’s independent financial advisers - who are authorised and regulated by the Financial Conduct Authority (FCA) - can guide you through the pension maze and help you tailor a plan to your circumstances.

If you would like to speak to one of our advisers about your pension options, click here.

A pension is a long-term investment. The fund value may fluctuate and can go down as well as up. You may not get back your original investment. Past performance is not an indication of future performance. Tax benefits may vary as a result of statutory change and their value will depend on individual circumstances. This is for your general information and use only and is not intended to address your particular requirements. It should not be relied upon in its entirety and shall not be deemed to be, or constitute, advice.

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