Contemplating life in retirement may be a near or distant prospect. Either way, the need to plan for retirement is a reality for everybody, whatever their age, background or occupation.
Working from Chelmsford Citizens Advice Bureau, Donna Reid works at Pension Wise, a free government guidance service designed to help you understand the choices you can make with your pension savings.
Donna meets with people to discuss their options for retirement and what they can do to make the most of their defined pension.
Having worked for the service for nearly two years, here are Donna’s four top tips on how to be Pension Wise:
1. Get to know your pension
Most people start to think about their pension when they get a letter from their pension provider six months before they’re due to retire. However Pension Wise is here for anyone aged 50 and over, wanting to discover and understand the choices they could make five or ten years down the line.
My role is to help you understand what pensions are, what your options are, if there could be any taxes and charges as well as the importance of scams and knowing what to look out for. Pension Wise is a very useful first step in the retirement journey.
2. Friendly, impartial guidance: worth its weight in gold
I’ve always been in a customer-facing role as I enjoy meeting people, I want to learn about you and what you want to do with your savings so that I can do as much as possible to help you get there. If we can, Pension Wise guiders will do everything possible to explain an issue for somebody. But if it’s something much more complex we will help with a bit of guidance on what questions you may want to ask an approved financial adviser – don’t worry, we’ll point you to the Financial Conduct Authority who can help find you a trusted person to speak to.
It’s important to know that we will never tell you what to do or even recommend a particular product, but an appointment with me is free – that’s terrific value instantly! Our impartial service is staffed by experts who want to help you. But I also want to educate and help you understand that there could be taxes and charges to pay, and that there are scammers out there trying to get hold of honest people’s savings.
3. Don’t be intimidated by the jargon
People are living longer and longer these days, so we want to help you as much as we can to make the best decisions for you – if you retire at 65 you’re likely to be living to your 90’s so making the right choice with your pension pot is absolutely key.
It’s really important to have something like Pension Wise around as lots of people are put off seeking financial advice, they can feel intimidated and embarrassed by how much they don’t know about pensions and that they feel they should.
4. Understand your options
The first thing everyone asks me, inevitably, is “What can I do with my money?”
Despite being one of the most asked questions it’s also the one that provides the most varied response. No two situations are the same – some of you may even be able to take your pension earlier than others. But what does remain the same is that you will all have six options, these are:
- Leave your pension pot untouched – You don’t have to start taking money from your pension pot when you reach your ‘selected retirement age’. You can leave your money invested in your pot until you need it.
- Buy a guaranteed income for life (annuity) – You use your pot to buy an insurance policy that guarantees you an income for the rest of your life, no matter how long you live.
- Take an income from your pension pot that’s adjustable – Your pot is invested to give you a regular income. You decide how much to take out and when, and how long you want it to last.
- Take your cash in chunks as and when you need it – You can take smaller sums of money from your pot until you run out. Your 25% tax-free amount isn’t paid in one lump sum, you get it over time.
- Cash the whole pot in – You can cash in your entire pot, the first 25% is tax free, the rest is taxable.
- A mixture of all the options above
You can book a free appointment with a local Citizens Advice Bureau by visiting www.pensionwise.gov.uk