Retirement – why should I get advice?
When you are coming up to retirement you have lots of decisions to make, not least how to convert your pension pot into retirement income.
Why get help?
Unless you are in a pension scheme that pays you, an income based on your salary once you retire, you are most likely to be saving in a scheme that provides you with a sum of money (known as your pension pot).
If that is the case, you will have to decide how you are going to use your pension pot to provide an income when you retire.
There are lots of options available, some more complex than others, but deciding which is right for you is not straightforward.
But even before you get to that stage, there are tricky questions you might need help with such as can you afford to retire?
Should you bring all your pension pots together? How much will your State Pension be?
New rules for accessing your pension.
In the past, once you had taken your tax-free cash from your pension pot, you had to use the rest of the money to buy an annuity that would provide you with a guaranteed income for the rest of your life.
But new rules introduced in April 2015 mean that once you are aged 55 or over, you can use your pension pot in any way you wish.
With more freedom comes more choice and many people might want professional financial advice to help them decide what to do with their pot.
Even if you have never taken financial advice before, this is probably the time to do it.
Unless you are very sure about what you want to do, taking advice could be the soundest financial decision you will ever make.
What type of advice can you get?
If you decide to go on and take financial advice, it is important to understand what type of service you’re getting.
As confusingly, not all types of financial advice give you the same level of protection.
There is plenty of information and help available about retirement products, but this might not be personalised financial advice.
With personalised financial advice your adviser will take you through a fact-finding process to collect information about you.
They then use this to assess your circumstances and give you a personal recommendation about what they think you should do.
Any action they recommend must be suitable for you.
More choice, less risk
Independent financial advisers providing personalised financial advice have access to a wider range of choices than you would be able to access realistically on your own.
They also have expertise and qualifications in the area you need advice on.
You get what you pay for
Personalised financial advice must be paid for. Independent financial advisers must tell you how much the advice will cost and what this covers before you go ahead.
By using a qualified professional, you are paying someone to help you avoid making expensive and sometimes life changing mistakes.
If you decide to buy direct without advice, still check what it is costing you.
You might not save money by buying without advice as often intermediary or broker fees are hidden in product charges and these might not be obvious.
Even if you buy direct from a provider there might be hidden product charges which mean you are not paying much less than if you had taken advice.
At the very least compare the costs of buying directly with the costs of taking advice before you make a final decision.
How do you pay for financial advice?
Following changes to the rules in the way that financial advisers can charge for retirement advice, you now pay a fee for advice rather than commission.
Your adviser must give you information on their fees before you commit to taking their advice.
It is important you agree in advance the type of advice you want so that they can give you an accurate estimate of the overall cost for the advice.
If you are vague or unclear about your needs, it is harder for them to estimate how much work is involved.
You can ask the adviser to break down the fees so you understand what they will be doing for you.
Also, remember to keep the cost of advice in perspective. If good advice helps sort out a complex problem that will affect your finances for many years to come, it is money well spent.