Just when you thought you had got the big decisions in your life out of the way, the government have thrown another one into the mix.
New pension legislation means that those over 55 years of age are now able to access their pensions and choose what to do with their lump sums.
The changes will also affect independent financial advisers (IFAs), and they will be looking at how new challenges from clients change demands on back office systems for IFAs.
One option will be the fact that back office systems available for IFAs are available through Intelliflo.
For those looking for information on the new legislation, the government website is a good starting point.
Confusing
The main decision will revolve around balancing a lump sum and a regular income. The options can be very confusing for the layman, and the general consensus is that the advice of an IFA is essential if you are to avoid financial problems later in life.
Although a current pension provider, or the government website mentioned above, can offer general advice, there is the danger that it may not be the most suitable for an individual. Everyone’s needs are different, as everyone’s circumstances are different. Some people in their fifties may have paid off their mortgages, for example, while others still have years of regular re-payments to finance.
Put simply, the question is: how do you best manage your pension funds to provide cash availability and regular income for the rest of your life? Tax issues will also have to be addressed, as will how to spread investment across different products and services to provide the optimum solution. This latter consideration also involves risk management to ensure a balanced portfolio of investments.
Choose
The major consideration facing people at this point is whether to access the pension at all. If you choose to do so, then you need too decide between an annuity or an income drawdown scheme. The former can be purchased from an annuity company, while the latter involves investing your funds and taking a regular income from your pot. You can, of course, take out a cash lump sum, but this is only tax-free up to 25% of your total pot.
If this brief introduction sounds confusing, then perhaps an IFA should be your first port of call.
