The pension planning age change - Ignore it and you could lose out!

What’s changing?
From 6 April 2010 the minimum age that pension benefits can be taken rises from 50 to 55.

For many of people this change could well have a significant impact on their retirement plans as they may not be able to access their pension benefits when they want. And many  people don’t even realise this fact. Plus, there is no transitional period, so this seemingly small change could have severe consequences for your retirement plans.

What does this mean for you?

For clients between the ages of 49 and 54 this could have a huge impact. If you don’t act before this date access  to your pension benefits will be restricted. 49-54 year olds need to act now.

Those younger than 49 years old need to consider reviewing their personal circumstances as they could still be affected.

Do you know you can switch your pensions much like you can switch your car insurance?

Now you’ve got your pension in place, you stick with the same one until you want to retire. Right?

Perhaps. But have you ever thought about switching your pension plans?

Sticking with the same pension product or pension plans until you retire might not necessarily be the best option for everyone. If you have an outdated pension plan, you may benefit from moving to a modern flexible pension, with lower charges, more choice in how you invest your savings and which can be monitored online.

More and more people are happy to look around for the best deals and switch their credit cards and mortgages to save money, but when it comes to switching their pension to get the best deal, very few people have done so. Are you one of those people?

Okay, you may think it’s a bit of a hassle changing financial products, and sometimes it seems easier to leave things as they are. But you could be missing out if you choose to stay in your existing pension plan.

Also, if you have a number of different pensions, perhaps relating to employment with different companies, it can often be beneficial to consolidate these in a single pension plan. This makes it easier for you to put a value on your total pension savings and may allow you to benefit from lower charges and an overall investment strategy tailored to your individual needs.

Of course the decision to switch pensions requires careful consideration and it may not be in your best interest to switch, therefore it is important that you receive financial advice from a professional adviser before deciding to move your pension.

Why switch pensions?

The decision to switch your pension plan can be a complex and time-consuming exercise.

As with credit cards and mortgages, there are many products to choose from, all offering competitive rates, increased flexibility and more options. So it’s no wonder switching can seem a bit confusing. In reviewing your existing arrangements, you may discover that there are better returns available from switching to a newer, more modern pension plan. For example, you may have a personal pension that you took out some time ago, in which case it may be worth comparing what features a newer, more modern style plan could offer.

If your plan has one or more of the features in the ‘old plan’, it may be in your interests to have your plan reviewed, and look into the option of switching.

It should be noted that transfers depend on personal circumstances and may not always be in your best interests.

There may be valuable guaranteed benefits attached to your current plan which you would lose if you transferred. Your financial adviser will be able to provide further information about whether this applies to you.

Points to consider when switching…

Although switching pensions might give some people more money at retirement it’s not necessarily the best option for everyone. Reduced charges may play a major role in the decision to switch your benefits, but other aspects of the plan could be of more value to you.

Flexible options relating to your circumstances or access to a wider choice of investments may be of more importance. For example, you might be prepared to pay higher charges to benefit from potentially better investment performance. But remember, investment returns may fluctuate and are not guaranteed. The price of units can go down as well as up.

Weighing up the potential costs and benefits of switching can be crucial in determining how big your pension pot will be at retirement. The checklist below should provide some useful points to consider when deciding to switch or not.

If you answer ‘yes’ to any of the questions below then switching your pension may be a suitable option for you.

Although the checklist highlights some of the key points, there are other questions that need to be considered. For example, should you switch your existing funds or just new payments? And will you lose any valuable guarantees if you switch?

You must also consider the increased complexity involved in transferring out of an occupational pension scheme. With this kind of transfer there is a lot more to consider, and so it is important that you seek professional financial advice to be sure it’s right for you. Production of a transfer value analysis is a necessary requirement of the transfer process.

• Does your current pension plan have high ongoing charges?
• Does your current pension plan offer limited or no fund choice?
• Does your current pension plan have exit penalties or any other deductions on switching?
• Has the performance of your current pension plan been poor?
• Does your current pension plan offer self investment options?
• Does your current pension planning have additional features, such as payment protection?
• Can you view information about your current pension plan online?
• Can you access your pension benefits early, without penalty?

What do I do now?

So you’re now aware of the main issues and opportunities surrounding switching your pension, but you’re still not sure if switching is right for you.

So what’s the next step?

Contact a financial adviser at Premier Plus who will be happy to discuss your finances with you and will help you to decide whether switching is right for you.

Advisers may charge for any advice given but will confirm the cost of this at outset.

Tags: future planning, pension, Pension Planning, pensions, retirement