Pension changes could leave many without cash
12/01/2015
The charity Age UK has warned that the pension changes coming in April could leave significant numbers of older people running out of money in retirement.
The new rules mean anyone over the age of 55 can take as much money as they like out of their Defined Contribution schemes, at lower tax rates. Age UK believes with the new rules pensioners may run out of money by age 75 years.
They use an example of someone on a £29,000 pension pot who would withdraw £3,000 a year from the age of 65. They would run out of money at age 75. Their money will last longer if they draw only £2,000 each year, but only until age 81. The average life expectancy at age 65 is currently just over 83 for men and just under 86 for women.
Even smaller withdrawals mean many pensioners risk having to survive for several years without any income from their Defined Contribution pensions.
Age UK also claim that the pension changes do not include enough safeguards to help people understand the impact of their decisions or help them make the most of their savings. In response to their warning they have launched a eight point plan, which sets out actions that the Government needs to implement to give the public increased financial safeguards and confidence in the pensions industry.
The Government has said that everyone will be entitled to free and impartial advice on their pensions.
Caroline Abrahams, Charity Director of Age UK, said:
‘We welcome people having more flexibility in how to use their pension savings. But that makes it even more important that we fully understand the implications and consequences of our financial decisions and can trust the financial services in which we have invested.
‘That’s why we believe that there must be additional checks and balances introduced to the pensions legislation in addition to the impartial guidance that will be available.
‘This is too important to leave to chance. We believe, if implemented, our eight-point plan would give people the added security and reassurance they need to know that they are making the most of their hard earned savings.’
Need financial advice?
If you have any personal finance questions related to this news article, then please contact our financial advisers. You can get in touch by asking a question online, calling us on 0800 092 1245, or by arranging a visit.
Share this..
Related stories
Two thirds of people don’t pay attention to pension pots
29/07/2015 Two thirds of people over the age of 45 have admitted to not paying any attention to their pension pot, according to research from Aviva. The research found that 41% of people aged over 45 never take the time out to review or plan their pensions, and 29% only spend one day a year doing this. A quarter of those that are retiring as soon as 2017 have still failed to spend any time...
Read MoreBrits will be forced to retire later
Research has shown that the vast majority of independent financial advisors (IFAs) believe that increasing numbers of people will be so strapped for cash that they will have to retire later in life even if they do not want to keep working.According to Aegon's latest survey, 88 per cent of IFAs believe the average retirement age will rise significantly in the next ten years, with more people unable...
Read MoreIs the government's pension policy working?
With 9 out of 10 final salary pension schemes now closed to new members there are serious concerns that the UK government's pension policy is not working. More employers than ever before are also complaining about the cost of enrolling their members in pension schemes and indeed the introduction of new pension regulations has not helped the situation. The pension situation in the UK is now at a cr...
Read MoreLarge pension funds 'move into the black'
Some of Britain's largest pension schemes have moved into surplus, despite the falling equities markets.According to new figures from Mercer, company pension plans from FTSE 350 firms moved from a collective deficit of £47 billion at the end of June to a £1 billion surplus at the end of September.Falling liabilities at the schemes were cited by the firm as a reason for their move into the black....
Read MoreCan the public sector pension problem be solved?
The problem with the public sector pension issue is that various unions in the UK are very strong in this particular area, and have shown only recently that they are willing to back up support for their members with strike action. In many ways the UK government, and local authorities, have a loaded gun to their heads because ultimately if they decide to push through pension changes the unions will...
Read More