Article by Phil
Do you need financial advice on pensions? If you do, we can help.
More and more people are choosing to cash in their pensions either in full or in part but is it the right thing to do? That’s where financial advice on pensions would help. Since 2018 the number of people cashing in their pension in full has increased by almost 30%. That means over 100,000 more people cashed in their pensions last year. The Financial Conduct Authority are rightly concerned about this increase in numbers because they are concerned about people being able to afford their retirements.
This is important with over 12 million people on course to have less than the basic income requirements in retirement. That’s 31% of retirees according to Scottish Widows. This is confirmed by Standard Life research which found that 30% of people said their living standards had worsened since they retired. Compared with only 20% who said they felt better off.
When it comes to cashing part of a pension in these numbers have doubled. Up from 163,000 in 2108 to over 320,000 people last year. The total value cashed in was £5.7 billion.
Self Employed need advice the most
According to the latest figures from HMRC, less than 10% of the UK’s 4 million self-employed workers made any pension contributions. Of the 360,000 who did pay into a pension 25% paid in less than £1000. The average paid in was just over £7,000. Nowhere near enough to meet the basic income requirements.
This is going to lead to pension poverty in retirement without doubt.
Pension advice on divorce
Many people are looking more specifically at financial advice on pensions as part of a divorce settlement according to Moneyfarm. They found that 35% of women were worried about being left in “financial ruin” if they divorced.
- 40% said they felt trapped in their marriage because of finances.
- 65% were dependent on their spouses income.
- 40% said that being able to split pensions fairly was a top priority.
All good reasons to take advice.
Tax impacts on pension savings
Last year the government introduced changes to tax savings on salary sacrifice pension contributions. It said it would replace over £4 billion but affect only the most well off. Turns out that was wrong as you’d expect. Analysis now shows that almost 3 million people are expected to pay less into their pensions as a result.
Just at the same moment we’ve learned that 15 million people are heading for poverty in retirement.
Remember tax free cash will change to 57 in 2028.
Savers and those planning to retire are being reminded that changes to the tax-free cash element of pensions are being made in April 2028. The age at which tax-free cash can be accessed will rise from 55 to 58. It has been 55 since 2010.
At the same time the state pension age for many will rise to 67. Don’t get caught in the trap, get some financial advice on your pensions.
Advice is not just for pensions
Research from Iress found that:
- Only 11% of people had taken financial advice on pensions
- Only 32% used an advisor when they took out protection
- Less than 50% took financial advice when they took out their mortgage
- Yet over 35% of people thought they would benefit from advice.
The FCA are hoping that the launch of simplified advice will help. The new measures will allow people to access “generalised” advice and products deemed to be suitable for them as part of a wide group of people with broadly the same needs and objectives. Rather than advice being provided on bespoke basis as we do it today. The idea is that the cost of advice will be a lot lower.
With Artificial Intelligence solutions lurking in the background, it could be a watershed moment for UK financial services, with the ability to get one to one financial advice on pensions less easy in the future.
Is Equity Release set to grow?
The Equity Release Council thinks so. According to their figures for people aged between 55 and 80:
- 650,000 have over £400,000 in equity.
- 8 million have between £200,000 and £400,000
- Meanwhile 3.7 million have pensions below the moderate living standard.
But only 13% said they would consider equity release. Instead, 60% would cut spending and 40% would down size.
Get more information.
For more information about financial advice on pensions why not contact Christina today. We offer a free initial meeting to discuss your requirements and explain how our service works. You are under no obligation to use us after that if you don’t want to and we won’t pester you.
So why not call us today on 01282 614444 or e mail us enquiries@ccfps.co.uk or use our contact form online.
Or if you’d prefer to think about it some more, why not have a look at our Facebook page, our Vouched For page, or our Testimonials page to see what our customers think about us.
