Are you following the right path?
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As a firm which offers wealth management in Kent, we’ve written before about how pension freedoms have given people flexibility to plan their retirement but that it is always advisable to secure good advice. We’ve all read stories in the media about people who are tempted by ‘get rich quick’ investment ‘opportunities’ or are talked into a pension by a cold-caller.
Now the Financial Conduct Authority (FCA) is consulting on measures to stop up to 100,000 consumers a year losing out on pension income when they access the pension freedoms.
The FCA had previously expressed concern about consumers moving into drawdown and holding their funds in investments that will not meet their needs. It is proposing that firms offer customers who do not take advice a range of investment solutions that broadly meet their objectives, otherwise known as 'investment pathways'.
The FCA is also proposing that consumers’ pension investments are not defaulted into cash savings unless the customer actively choses this option. These measures are a part of the FCA’s wider pensions strategy and follow from the Retirement Outcomes Review report in summer 2018.
The FCA has also announced new rules on the 'wake up packs' that must be given to consumers as they approach retirement.
“Pension freedoms give consumers more flexibility in how and when they can access their pension savings; but that also means they have to make more complicated choices,” explains Christopher Woolard, Executive Director of Strategy and Competition at the FCA. “Our Retirement Outcomes Review identified that many consumers are focused only on taking their tax-free cash and take the 'path of least resistance’ when entering drawdown.”
He continues: “This can often mean that the rest of their drawn down pension pot is not invested in a way that meets their needs and intentions. We found that around one in three consumers who have gone into drawdown recently are unaware of where their money is being invested. This leads to poor consumer outcomes.”
Here at The Goodman Partnership – which offers financial planning in Tunbridge Wells – we are already working with our clients at retirement and pre-retirement to understand and make the most of pension freedoms. Informed advice is key, as it enables people to weigh up their options and make the best decisions for their future.
If you are considering taking advantage of the benefits pension freedoms bring, talk to your local retirement planner in Tunbridge Wells on 01892 500600.