Pension savings will be embarked upon by millions of people who are planning towards later life. Whether this be through workplace arrangements, private agreements or both, saving towards a pension can be vital for ensuring income after leaving the workforce. However, recent research has revealed many people are unaware of pension freedom rules, which are a vital consideration in managing one’s money.
“The reality is that during the pandemic, many people may have had to reduce their work hours, their savings or the amount they put into pensions.
“This will all have a serious knock-on effect now we are coming out of lockdown.
“As a result, those over 55 may be looking to pension freedoms as a safety net.”
This year, close to one million people are set to celebrate their 55th birthday, a major milestone when it comes to pensions.
However, it is worth noting there will be changes in the future for pension freedoms.
From 2028 onwards, Britons will have to be 57 in order to access their pension savings.
It is not yet clear how this will be implemented, but it could either be enacted from a specific date, or phased in over time.
Regardless, this may change some retirement plans for certain individuals.
John Glen, the Economic Secretary to the Treasury, stated the change was to reflect “trends in longevity” as well as to encourage people to remain in work.
With increased life expectancy, people will have to make their pension savings last for longer.
An increase to the pension freedoms age, therefore, is likely to help ensure pension savings provide for later life and do not run out.
However, while pension freedoms have benefits, there are also drawbacks which are important to consider.
Ms Currie added: “While the advent of pension freedoms has provided flexibility for many and given retirees more control over their later-life savings; it has also increased the chances of those who don’t full grasp the considerations of drawdown running out of income during retirement.
“Both the benefits and these risks are something that employers should be aware of.”
As a result, then, Ms Currie concluded by stressing the importance of seeking support and advice where possible.
This can be done either through personalised independent financial advice or through other channels.
A new solution known as an Investment Pathway can help individuals who are not receiving any personal recommendation.
Indeed, some individuals may wish to take matters into their own hands using services such as PensionWise or the Money Advice Service to find out more.