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Get it wrong and it could cost you dearly in the future. So, what are the options?
IIf you have a private pension — and four out of five families now do — you may be puzzling over what to do with your savings. Once you hit 55, you can do almost anything you like with your pension pot. It's a big change from the old system — in which your workplace pension was automatically converted to an annuity (an income for life) — and it brings with it an equally big decision to make. A recent study by the People's Pension and State Street Global Advisors tracked 55- to 70-year-olds for a year to find out how people were making this choice. They asked people what they had decided to do with their cash and, importantly, if they had any regrets. Here's what they learnt...
Take your ti me + Don't rush to make a decision and get all the help you can. Making a decision may take longer than you expect - those surveyed said it took a good six months to get to grips with their options. + Make sure you use the Government's free Pension Wise service, which proved a hit with those who took advantage of the help. It can't tell you what to do with your savings, but its experts can explain your options and the tax implications. If you want more help choosing a retirement product, it's worth seeing a financial adviser. Impartial advice will cost you money, but new rules mean you can draw up to 500 from your pension pot up to three times to pay for an appointment * To find out more about free help, visit goodhousekeeping. co.uk/Pension-Wise-Help * Go to penstonwise.gov.uk/en/ appointments to book a Pension Wise appointment * Find an independent financial adviser at unbiased.cosuk Leave it where it is Just because you can access your private pensions from the age of 55, it doesn't mean you have to. One woman in the study said: 'When I retired, I took my 25%, but I actually didn't do anything with it. In hindsight, I was probably better leaving it where it was... I could have kept it in my pension pot and then it would have been worth a lot more. So, ignore the noise and think carefully about your own situation before deciding whether you really need to access the money now. Don't assume property is the answer Some people in the study took money from their pension to invest in buy-to-let property -and encountered problems. Some struggled to find tenants, and others were stung with high taxes for taking cash out of their pension but have not been able to find a property to fit their needs, so their money was left in a bank account earning very little interest, while stock markets have performed well. Beware the scammers Be wary of unsolicited calls about your pension. The survey found that some people had been contacted by someone they believed to be a scammer, offering big returns on their money or trying to push them into having a 'free review'. New rules mean that unsolicited calls, texts and emails about your pension are illegal, so if you receive one, it will be from a scammer looking to trick you into handing over your hard-earned cash. If a scammer does call: * Hang up immediately * Call Action Fraud on 0300 223 2040 * For more on pensions and other money issues, go to goodhousekeeping.co.uk/ consumer-advice