21 June 2017: Pension Wise – ‘Four top tips’
Whether retirement is a near or distant prospect, everyone needs a plan in place for their later years.
Working within Citizens Advice LeicesterShire, Pension Wise is a free government guidance service that helps people understand their pension and the choices they have.
Michael Kochanewycz, a Pension Wise guidance specialist with over two years’ experience, regularly meets with people to discuss retirement options, and how to make the most of a defined contribution (personal or workplace) pension.
These are his four top tips on how to be smart about pensions
- Get to know your pension
Most people start to think about their pension when they get a letter from their provider six months before they are due to retire.
However, Pension Wise can help you plan ahead. It’s available to anyone aged 50 and over with a defined contribution pension. It can help you understand what your options are, any taxes and charges to be aware of, as well as scams and knowing what to look out for.
With people living longer, it’s essential to make the best decisions when it comes to your retirement. If you plan on retiring at 65, you could live into your 90s, so making the right choice with your pension pot is key
2. Friendly and impartial guidance is worth its weight in gold
Pension Wise guidance specialists will do everything possible to explain your options. If you have a more complex question, they can signpost you to an approved financial adviser through the Financial Conduct Authority.
Appointments are free, impartial and Pension Wise won’t tell you what to do or even recommend a particular product.
Staffed by expert guidance specialists who want to help, Pension Wise will help their customers understand the rules around taxes and charges, and how to avoid becoming the victim of scammers.
3. Don’t be intimidated by the jargon
It’s easy to feel intimidated by pensions and the jargon could end up putting you off. But that shouldn’t be the case. Pension Wise can help you make sense of the seemingly difficult and technical aspects of your pension and make dealing with it more straightforward.
4. Understand your options
The first question most people want answered is “What can I do with my money?”
Despite being one of the most asked questions, there is no set response as no two situations are the same, and people may be able to take their pension earlier than others.
But what does remain the same is that everyone has six options:
- 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 per cent 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 per cent is tax free, the rest is taxable.
- A mixture of all the options above.
You can book a free appointment with Citizens Advice LeicesterShire by calling 0800 138 3944 or by visiting www.pensionwise.gov.uk