27th February 2015
If you’re thinking of stripping cash out of your pension in April, hold your horses and wait for a better deal, says pension consultant Marcus Hurd.
From 6 April over-55s will be able to put the wheels in motion to access their pension as a cash lump sum. While this is an exciting prospect for many, Hurd said that patience will be needed as the reforms are implemented and waiting could result mean you benefit from an innovative new product.
Hurd, who works for Buck Consultants, said: ‘Since the changes were announced in the 2014 Budget, the pension industry has been urgently transforming its systems and processes to accommodate the new flexibilities allowable under the new pension regime.
‘With the actual legislation only available within the last few months, however, the pension industry is under significant pressure to be able to deliver the required changes.’
While Hurd said there is ‘no question of an individual not being able to exercise their freedom on 6 April’, just because they can access the money doesn’t mean they should and ‘they may be better waiting for a short while until the market rationalises itself’.
He said it was a mistake for retirees to assume their pension scheme would automatically be able to provide freedoms and ‘in fact they may need to transfer to another type of pension scheme first’.
‘Over the next year or so, new and more innovative products will become available and individuals will have far greater choices in the way in which they can exercise their new-found freedoms. Such developments will also reduce costs and as well as provide additional benefits,’ said Hurd.
He added that in the first few months of the pension freedoms those who have delayed retirement to take advantage of greater flexibility will be those accessing benefits.
However, later retirees are the one ‘who should particularly look at delaying their decisions until the market has settled and new products have been made available’.