Pensions Freedom has brought with it a huge amount of publicity in this area. Lots of speculation around over 55s taking their pension pots out in one go and buying expensive supercars. All of this misses one clear problem at retirement and that is the sheer complication of this area. The general knowledge gap that exists here is still too high. We need to ensure that the differences between pensions – the savings vehicle and the various methods of using those savings to replace salary in retirement is clear. The need for advice is at its greatest here. There are many options pre and post retirement that are not well understood.
It is vital that there is engagement during working years to ensure that the reality of income in retirement matches needs in retirement. With the state pension age increasing for some to 67 and probably higher than that with increased life expectancy there is a ticking time bomb of increased life expectancy and reducing income in retirement will leave todays workers unable to fund their own retirement.
Now the phrase retirement is an interesting one, I would suggest that to truly retire is to have the Financial freedom to do whatever you want, this could occur any Saturday with a winning lottery jackpot ticket. However for those who do not win or even play the lottery then planning for your retirement is key. This will take the form of various savings vehicles from ISAs in their any and increasing forms, personal pensions, final salary pensions, property and other investments. The key is ensuring there is enough to give you choices.
Onto some of the pressing problems.
So the message is simply that the area of pensions and retirement is complicated, made more so with the advent of “Pensions simplification”, “Pensions freedoms”, multiple regime changes and the unintended consequences of legislation change. It will continue to be a complicated and misunderstood area so the message is clear, advice is key!
This blogpost is intended to provide a general review of certain topics and its purpose is to inform but NOT to recommend or support any specific investments or course of action. Taxation depends on individual circumstances as well as tax law and HMRC practice which can change.
You are not certain to make money – you may suffer a loss.
About the author
Owen Hadden is the Pensions Specialist at Prosperity with extensive experience in the retirement arena built up during his time as a retirement consultant with LV=. He has a keen interest in sports and when not working can be found on the tennis and squash courts around the west of Scotland. He lives with his family in the south side of Glasgow.