When DIY can be VERY costly
Posted by siteadmin on Friday 13th March 2015.
We are just three weeks away from some huge changes to the way people can access their pensions.
On April 6th, new legislation comes into place which allows people significantly more choice with what they do with their pension pot.
When the announcement was made in last year’s budget, I took the view that it was certainly something which could be a vote winner. If I’m not mistaken, there’s an election pretty soon!
Without getting technical, there are lots of positives the changes bring but there are also a heck of a lot of possible pitfalls.
In short, there will be three principle choices. To buy an annuity (a regular income for life), take regular chunks from your pension pot as and when you wish or take the whole lot in one go.
Now the part of all of this that concerns me the most is that up to a certain level, people will be able to do it for themselves. There's absolutely no problem there as long as they know what they are doing, go into it with their eyes wide open and are fully informed.
I think some people will think ‘Great, I can just Google my options, make some decisions and save some money not paying for advice’.
But this is where the painful pitfalls could be lurking. Look at it like this. You have a health issue which you Google and hey presto, you find out what's wrong. Armed with your cyber diagnosis, you visit your GP and tell him/her of your medical discovery and how it can be cured.
This is the bit where the GP’s numerous years of study, experience, application and more importantly knowing your medical history kick in. They point out that your chosen treatment may not be the best way forward due to other matters at play and prescribe a more appropriate alternative knowing your circumstances.
It’s exactly the same with these pension changes. There are numerous things to take into account before doing it for yourself. You could be making yourself significantly more liable for tax and potentially lose benefits. In a nutshell, doing it yourself could prove a LOT more costly than getting an expert to assess, review and help you.
I’m off to Miami next week. A holiday with my wife then onto a wedding in Kansas. It should be a lovely occasion being the daughter of close friends where with ours, the girls all grew up together. Our daughter is meeting us out there along with numerous other friends.
She’ll be the first one of the group to get married so it’ll be extra special.