Savers risk running out of money in retirement by failing to seek financial advice before withdrawing or investing their pension pots.
An increasing number of retirees are putting their money into drawdown products without fully understanding the risks involved.
Ever since the 1800s, it has been the norm for retirees to purchase an annuity in order to guarantee a set income for the rest of their life. However, this tradition was widely abandoned in 2015, thanks to the Conservative government’s pension freedom reforms.
The reforms gave those aged 55 and over greater flexibility with regards to how their pension savings are accessed and used. Many retirees are now choosing to take money from their pension pots as a lump sum. Others have reinvested their funds in everything from stocks and bonds to property or overseas pension schemes. In the first year of the pension reforms alone, around 90,700 savers invested £6.1billion in drawdown products.
Although there is still some demand for annuities amongst those seeking the security of a guaranteed income, this type of pension vehicle is now widely considered expensive due to record low interest rates and high fees.
Reinvested pension savings can often outperform the income provided by annuities, but it’s crucial that retirees access specialist financial advice before making a decision.
Failure to choose a suitable investment platform can cause a whole host of problems for pensioners who’ve worked hard throughout their careers to save money for retirement.
Some retirees have reported losing money in high risk investments they were unprepared for, others have faced slow growth or unprecedented fees. In severe cases, some pensioners have lost thousands of pounds or have outlived their savings.
By seeking specialist financial advice not only can you improve the performance of your retirement savings, you can also maximise your chances of an income that will last the rest of your life – whether that requires an annuity or not.
Contact us today for more information and find out how Pension Justice can help you.