The government’s free Pension Wise advice service for pension savers has revealed the top five questions asked by those planning their retirement.
The service was set up when the government introduced pension freedoms for the over 55s in April 2015.
The aim was to offer guidance about how to access their pension cash and plan their retirement finances.
Although advisers will not tell people what to do with their money, they will explain the options that are available.
Here are the five questions savers ask the most:
What sort of pension do I have?
Savers have one of two types of pensions – a defined benefit (DB) or defined contribution (DC) scheme.
- DB pensions pay a guaranteed sum on retirement that increases in line with inflation.
- DC pensions pay a retirement income based on the value of the underlying fund without any guarantees or linking to inflation.
Tip:If you set up your own pension, it’s a DC scheme.
To check your pension type, try this online tool
What does a pension statement tell me?
The statement is sent out once a year and details:
- How much you have saved
- How much you should expect as income when you start drawing the cash
- Any extra features, like a survivor pension for your spouse or a guaranteed annuity rate
- Your expected retirement age
- Your transfer value – which is how much the pension provider will pay if you move to another provider or cash in your savings
How can I take my pension cash?
You can only take the 25% lump sum and regular pension payments from a DB scheme.
If you have a DC scheme, you have a lot more options:
- Leave the money invested
- Buy an annuity that provides a guaranteed lifetime income
- Put the money into drawdown, which lets you take a regular income
- Take the cash in lump sums when you like
- Take the whole fund in one lump sum
- Mix and match between all the above options
Can I transfer my pension?
You cannot transfer a DB pension but if you have a DC pension, you can switch your fund(s) to another provider
How do I spot a scam?
Most scammers cold call – that is contact you unexpectedly by text, email, phone or letter.
The best way to avoid a scam is refusing to part with any money until you have passed any written offer made by an adviser to Pension wise or another finance professional for a second opinion.
The adage is if the offer seems to good to be true, then it usually is a scam.
Find out more information
You can book a Pension Wise appointment for free advice through the organisation’s web site
