The recent pension reforms present big opportunities for people nearing retirement age in all sorts of ways, so it’s no surprise that many are looking to take advantage of their new found freedom. It puts a lot more power in peoples’ hands to be able to plan their future and look at other ways to invest their money. But, how can you plan your future without education and advice?
Weighing up the pros and cons of any type of investment is tough. Saying you should take advice is all very well, but who do you take that advice from? Most of the people who call themselves advisors or IFAs are really just product salesmen a lot of the time. These reforms have therefore only highlighted the fact that there is a huge gap in the market for genuine advice about choices and education in terms of what you can do and how you can take control. After all, you’re never going to be an expert.
So, if you’re intending to take all or part of your money out of your pension, where do you go for advice?
Well, not all advisors are sharks in shiny suits and there are companies that give good advice. The trick is to find someone, or several people, who can look at your life as a whole and you as a person and analyse your short, medium and long-term goals. For example, they should help you to establish whether income now and in the future is important, or whether intergenerational wealth is what drives you – getting your money from one part of the family to the next by considering inheritance tax strategies. They should then provide you with an overarching plan that contains many options that are tailored to you.
But advice often comes at a price, especially since new rules came into force that banned commission-based sales advisors from giving it for free. Paying for advice is not necessarily a bad thing, as long as it is right for you, but if you are unable or unwilling to pay for such advice, then the responsibility is even more so in your hands. The key then is to carry out enough research as possible from the free resources available to make an informed decision. This could include calling the Government services such as Pension Wise or the Pensions Advisory Service, or if you are lucky, consulting a family member or friend who just so happens to be an IFA.
Only once you get to that point where you feel like you have received enough impartial advice to make an informed choice should you take the plunge. And always remember, it’s not just about your financial goals, but your lifestyle goals too.
One piece of advice I can give you is to find a balance - diversify your portfolio so that you are able to respond fast, medium and slow to the challenges that life throws at you. It’s not good to have all of your eggs in one basket and anyone that has told you to invest all of your pension into one investment, be that property, an annuity or fine arts, is definitely a shark in a shiny suit.
