Lighthouse : Retirement – Pensions Freedoms

Since the introduction of pension reforms in April 2015, retirees have had much greater flexibility to spend and invest their pension pots as they wish. However, this means being faced with important decisions, both in the run-up to retirement and afterwards, that will affect our standard of living and financial outlook for years to come. An assessment of the reforms by the Financial Conduct Authority (FCA) found that, as the pensions market is evolving, it could be to the detriment of some retirees who don't take regulated advice when converting their savings into a retirement income. Some are simply relying on their pension provider for guidance and may end up in the provider's default option, while others are making a poor investment choice, such as withdrawing cash from the pension pot and putting it into a low return cash fund, where it runs the risk of being eroded by inflation.

Investment choices after retirement

With the freedom to take drawdown from your pension pot, comes the problem of where to reinvest the money. It is important to diversify by investing in a range of assets to prevent you from being over-exposed in one area, whilst at the same time being able to take advantage of rising markets when they happen. There are many different assets to invest in, which include cash, corporate bonds, equities and property. Alternatively, unit trusts or investment trusts give you the opportunity to invest in a portfolio of stocks and shares with one single investment. An adviser can develop a smart investment strategy to structure your wealth in such a way as to meet both your current needs and future goals.

Engage in your pension decisions

The FCA research revealed that up to a third of consumers enter drawdown without taking advice and another third are not even aware of where their money is invested. Working with an adviser will enable you to engage fully in your pension decisions and understand how your funds are invested.

Work with an adviser you can trust

The importance of a good relationship with a financial adviser can't be overstated. Even when you have made the decision about where to invest your money, your circumstances may change and you might need help reviewing your strategy. Being completely comfortable in your understanding of how your pension funds are being managed and that they will last you for however long you live, are key to a long and happy retirement.

An ongoing venture

You may have retired from work, but reviewing your personal finances and ongoing wealth management will continue throughout your retirement. With the aid of a financial adviser it's possible to develop comprehensive solutions with the goal of further prosperity and security in your retirement.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. Taking income or withdrawals in excess of fund growth may result in the fund running out quicker than expected. Inflation will reduce how much your income is worth over the years.