Louise Hanson, Director of Advocacy, ABIChoice is good, but can be bewildering. Think smartphones, energy suppliers and TV channels. And now pensions. Easter Monday, April 6, marks the start of a pensions revolution – more freedom and flexibility for thousands of savers aged 55 and over in how they can access their pension pot.
But with the new pension freedoms come added personal responsibility and a few dangers for the unwary. April 6 2015 is certainly no deadline to Act, but neither can anyone afford to ignore the changes.
With average life expectancy continuing to rise, someone retiring at age 65 can typically expect to live for around a further 20 years – a fifth of your average lifespan. And with other financial commitments to consider, such as how to pay for any long-term care that may be needed, making the right retirement choices has never been more important.
People should resist the ‘dash for the cash’ temptation. While few people would likely blow it on a Lamborghini or other luxury at the expense of securing a financially secure retirement, knowing what the best option is for your circumstances will present many people with a dilemma. This is why everyone should get behind and use Pension Wise. The Government’s free and impartial service must be seen as the first port of call to help people understand their options, and make the right choices. The insurance industry supports it, providers will be directing customers to it, and we believe that it will play a key role in helping people make sense of their options.
Of course one person’s choice can be another person’s criminal opportunity. These changes, enabling thousands of people to be able to unlock their pension pots will inevitably lead to a rise in criminals looking to cheat people out of their pension funds. As the saying goes: if something is too good to be true, then it probably is.
Once money is transferred into a scam it is lost forever, and could land you with a hefty tax bill.
Scammers are likely to encourage people to take their pension in cash and offer to reinvest it for them – but providers will not be able to conduct checks on these investments as they do now on transfers to other pension schemes. So warning people about the risks and features of a scam is all the more important, and the industry Code and the Pensions Regulator’s campaign launched this week will help to raise awareness.
The Government and the pensions industry are 100% committed to making these reforms work, and ensuring customers get all the information, guidance and advice they need to make the right decision. Pensions have never grabbed the public imagination. But now, by not rushing into any decision, seeking guidance from Pension Wise and avoiding pension scams, never has there been a better opportunity for thousands of savers to plan for a financially comfortable retirement.
Louise Hanson is Director of Advocacy at the Association of British Insurers (ABI).
The ABI today launched Your Retirement, Your Choice to help consumers understand their pension choices.