Published On: Fri, Oct 25th, 2019

Pension rules are changing next week – what it means for you and your retirement decisions | Personal Finance | Finance

With millions of people automatically enrolled into a workplace pension, pension wealth is something which will affect many people. However, pension freedoms mean there are plenty of options when it comes to retirement. In a bid to make reviewing one’s financial situation easier, as well as enabling pension holders to understand the options they have and any risks they may face, the Financial Conduct Authority (FCA) is enforcing new rules – coming into effect on November 1 this year.

“They tend to be large, often confusing documents, which are sent out to customers four to six months before their intended retirement date, but the rules are changing.

“From November 1 2019 pension providers have been told they have to significantly reduce the size of the packs, and increase the frequency.

“From this date, they must be sent out once the individual reaches the age of 50, and then every five years after that until the pension is fully cashed in.”

Mr Watts-Lay explained that there are other instances when Pension “wake up packs” may also need to be sent out.


“They will also need to be sent just before someone retires, whenever they request a retirement quote, and any time they take money out of their pension, with no more than five years between each pack, until the pension pot is empty,” he continued.

How will the packs differ to current packs?

“The new packs will also be different in that they have to include a one-page summary of the pension, information on how to access the government’s Pension Wise service for guidance and an explanation of the advantages of shopping around when purchasing a retirement income option (e.g. an annuity or income drawdown) and how to do this,” said Mr Watts-Lay.

“It will also need to include a single page identifying the main risk factors relevant to these options and highlight warnings in relation to each of these risks.

“This will take into account an individual’s age, proposed retirement date and amount of pension savings, and will cover things like tax issues, pension scams and investment risk.”

How have pension options changed?

Mr Watts-Lay explained: “Freedom and choice in pensions was introduced in 2015 and gave people the right to do what they want with their pension.

“It has been very popular with individuals, however, in practice, without the expertise of how to manage it, it can be easy for people to make poor decisions, which can lead to a permanent dent in their retirement income.

“We have seen hundreds of thousands of people in our financial education seminars, who simply don’t understand how to manage their income in retirement, and we have also all heard many stories of people who have ended up paying huge sums in unnecessary tax, or even losing their pension to scams.

“Hopefully the simplification and increased frequency of the ‘wake up packs’ will encourage people to take an interest in their pension and retirement earlier.

“The new packs should be significantly easier to understand. The packs should also make it easier for people to decide how they are going to manage their money in retirement, hopefully be wise to potential mistakes, and hopefully encourage people to put more aside for their retirement.

“Something had to be done, and these new ‘wake up packs’ are a good step in the right direction. However, it is still not enough.

“People need financial education early on in their careers so they understand the value in starting to save early for retirement, and the huge difference it makes to the amount that can be saved.

“Financial education and guidance, and regulated financial advice, are also needed when approaching retirement to encourage people to look more holistically at all their finances, and not just their pensions, to ensure they make informed choices. Many workplaces offer this to their employees, so individuals should find out if this is available for them.”

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