‘The secret to happiness is freedom’, wrote the ancient Greek historian Thucydides. And with the introduction of the pension freedoms rules, those aged over 55 now have far greater freedom of choice over how they use their pension pot to fund their retirement years.
The pension freedoms, introduced on 6 April 2015, dramatically changed the pensions landscape. How people can now access their retirement income is substantially different from previous generations. Pension freedoms have made it much easier for people to access their pension pots and as a result, some may think they can do it themselves.
Pension freedoms have put a greater onus on people to keep themselves informed of their options when it comes to accessing their pension money. However, little knowledge and understanding of the rules could mean some people risk making decisions that are not best for them.
For people in their 40s and 50s, understanding retirement savings is especially critical. Pension freedoms now give savers full access to their retirement savings from the age of 55. The reforms have given over-55s greater power over how they spend, save or invest their retirement pots.
‘Half of Britons aged 55 and over (51%) admit they know little about the pension freedom rules introduced in April 2015, according to research. A further one in ten (10%) over-55s say they know nothing about the changes, which represented a complete shake-up of the UK’s pensions system five years ago.”
The pension flexibilities may have given retirees more options, but they’re also very complicated, and it’s important to think carefully before making any choices that you can’t undo in the future. Withdrawing unsustainable sums from your pensions could also dramatically increase the risk of running out of money in your retirement.
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