Unlike the new Star Wars movie, it is unclear as yet whether the â€œfinancial forceâ€ generated by the new pension freedoms will ultimately be a force for good, enabling investors to access their funds more effectively or for the â€œdark sideâ€ as pensioners end up relying on state or should that be â€œEmpireâ€ handouts, having spent their retirement savings, possibly on a Lamborghini or used Millennium Falcon (some damage).
So far in the first 6 months since the freedoms were introduced over Â£4.7 billion has been released from pensions, more than sufficient for the recipients to have collectively purchased the Star Wars franchise at a mere $4 billion and finance the making of the three new films at an estimated cost of $200 million each. Given that the original 3 films cost around $66.5 million and returned global sales of $1.89 billion this would have represented a very good return. Unfortunately as the average lump sum paid out under the pension freedoms equates to around Â£15,000, such a return is unlikely. Rather worryingly around 80% of those taking a lump sum are aged under 65. Those with larger sums have been more cautious with around 40% still buying an annuity and the remainder moving into drawdown.
For the 5 million pensioners who already have an annuity, the Chancellor has confirmed the removal of tax restrictions from 6th April 2017 and the introduction of a secondary market for annuities. Those who have already purchased an annuity may be able to sell it for an upfront lump sum or move into drawdown.
To help retirees try to make sense of all the changes, the government introduced the Pension Wise guidance service and was estimating around 300,000 cases a year. So far though, the website has been accessed by 925,000 users and 18,000 have already used the telephone and face to face service. This service also only provides â€œguidanceâ€ and when considering issues which could have life changing implications, proper advice is going to be of key importance.
Cave & Sons Ltd team of Chartered Financial Planners are ideally placed to provide advice on the increasingly complex choices to be made at and during retirement. To discuss your requirements please contact Gregg Taffs on 01604 621421 or email firstname.lastname@example.org
This article is for information purposes only and should not be taken as advice or recommendation. Advice should always be sought for your personal circumstances before taking action.
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