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Home > Blog > Pensions > Do I Need Advice On My Pension?
Your pension is one of the most important investments you’ll ever make. So it’s important to ensure you have the best pension plan in place and fully understand the implications of pension transfers. Here, we’ll be explaining why it’s a wise investment to get regulated pension advice.
Have you ever wondered, ‘do I need a financial adviser for my pension?’ If so, you’re far from alone. But if you knew the value of seeking pension advice, we doubt you’d think twice.
What if we told you that from 2001 to 2006, Britons who took professional financial advice enjoyed an average boost in pension wealth of nearly £31,000 over the course of ten years, compared to those who didn’t take any advice on pensions? That’s according to figures from the International Longevity Centre (ILC).
The main benefit of taking pension transfer advice is that you’re likely to be better off than if you go it alone. Getting a second opinion from a professional is never a bad idea, particularly when talking about your hard-earned retirement nest egg. For instance, a financial adviser can help you understand and manage the potential risks and give you advice regarding the tax implications involved.
You might be tempted to consolidate your pensions into one pot if you’ve accrued several pension pots from different employers throughout your working life. A financial adviser can give you an overview of all the essential details you need to consider before making such a move. Considerations like exit charges, ongoing management fees, and whether you might lose any benefits if you transfer; helping you to weigh up the pros and cons.
If you’re aged 55 or over, you can indeed transfer your pension into your bank account. Not directly, though. You’ll have to withdraw the money from your pension funds first. You can take up to 25% of the money in your pension as a tax-free lump sum, but, you will need to check your current pension to see if this can allow flexible drawdown..
This could either be as cash, an annuity that gives you a guaranteed income for life, or a flexi-access drawdown that keeps your funds invested but gives you regular income or ad hoc amounts when you need them. Remember that taking out lump sums from your pension could mean you won’t have enough money to live to the standards you expect in retirement, so pension transfer advice is essential.
If you’re approaching or beyond the age of 55 and considering accessing your defined contribution pension pot, we can’t overestimate the value of expert pension transfer advice. It’s a legal requirement to seek final salary pension advice (also known as defined benefit pension transfer advice) if you’re thinking of making a final salary pension transfer valued at more than £30k.
Under the current rules, you can withdraw up to 25% of your pension tax-free from the age of 55. However, that does mean that the remaining three-quarters of your savings are taxable as income. In addition, if you decide to take the full tax-free amount in one lump sum, any further payments are subsequently treated as taxable income.
The other alternative is to take staged payments that combine tax-free cash and taxable income. In this scenario, 25% of each smaller lump sum will be tax-free, and the remaining 75% will be taxable. Taxable amounts are added to your other income, leading to an extra tax bill. This additional income could also tip you into a higher tax rate and cause you to lose out on certain tax allowances.
For a secure and planned future, start thinking about your future retirement income now. Hilltop offers a regulated and completely independent pension advice service for those looking to make the best decisions for tomorrow – today. With our help, retirement confidence is just a phone call away. We keep things simple and provide you with all the tools you need to make informed decisions about your pension.
Given how much better off those surveyed pension savers who sought out pension advice were after ten years, imagine how much wealthier you could be over a 40-year career. Compound interest and investment growth are likely to deliver a substantial return on investment. Seeking advice at the point you begin accessing your pension pot can also prove just as, if not more, critical, helping you to manage funds to enjoy a long and happy retirement.
If you’d like more advice about pensions, or would like to arrange a consultation, please contact us on 0161 413 7051. We’re open 9am to 5pm Monday to Thursday, and 9am to 4pm on Fridays. Hilltop Financial Planning is authorised and regulated by the financial conduct authority. Our advisers have over 100 years of combined experience and knowledge of working with people like you and helping them make the most of their finances.
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