20th April 2015 at 9:14am
There has been no shortage of stories about what could go wrong for pensions now that the much-anticipated pension changes have landed.
Me, I’m more optimistic. The headline I’ve always wanted to see is more along the lines of ‘people save all their lives and retire comfortably’.
But imagine things do just turn out really well. Here’s how that might look…
The success of automatic enrolment – where employees join their company pension scheme – continues with smaller employers. Another five million people are joined, with less than 10% deciding to opt out. One million employers become champions of the cause.
People start to become really interested in their pension savings. They look at how much they’re saving and where the money is invested. As they move from job to job they take their savings with them, carefully and deliberately growing their pension pot.
The State Pension becomes a fairer and better understood retirement income on which to build.
As people approach 55, they think about their options carefully. They speak to all the right people who help them understand things better. Many see the need for financial advice and those who do value speaking to an expert to get information on their own situation.
Those who will genuinely benefit from taking their pension in cash do so, and those that won’t, don’t. The former pay off the mortgage, gift money to family or simply enjoy it – whatever they value – with no regrets. The latter work out a financial plan to make their money last longer. Those wanting a guaranteed, stable income, shop around and buy an annuity that’s the right shape for them, at a competitive rate, at the right time.
And with plans afoot to allow people to cash in their annuities from 2016, those who already have one will carefully consider whether they want them to continue, and have options to do something different if they don’t.
People not only trust pensions, they see them as exciting. Ok, so I got carried away here…
I thought all this was my imagination going into overdrive until I realised that the reality is that most of this is already happening, or could do very soon. And that’s a headline worth reading.
The information in this blog or any response to comments should not be regarded as financial advice. A personal pension is an investment. Its value can go up or down and may be worth less than you paid in. Laws and tax rules may change in the future. The information here is based on our understanding in April 2015.