You may have seen the Panorama programme on television on Monday night attempting to explain the new pension reforms. While the programme did highlight some of the potential pitfalls to be aware of, there were a couple of the sections that I felt were a little lacking:
- At the beginning of the programme, the presenter looked at an average pension pot of around £32,000 and then proceeded to go on an imaginary shopping spree with the funds. The one problem was, he did not appear to account for the tax that would have been paid if you had taken this whole pension pot in full. Unfortunately, many people seem unaware that there is tax to pay on any pension withdrawal after the 25% tax free portion has been taken.
- There was also a case study of a lady who had recently been ‘forced’ to purchase an annuity. The concept of a drawdown pension has now existed for over a decade and, since it’s introduction there has not been a ‘requirement’ to purchase an annuity. The sad truth is that many people did not understand the options available to them when making the once-in-a-lifetime decision about how to use their pension funds.
What the programme highlighted is the increased need to ensure that you are aware of all of the options available to you at retirement. A qualified Chartered Financial Planner can help you to do just that!
