Would you remove your own appendix to ‘save money’?

Would you attempt surgery without a professional? No, so why should pensions be any different?

Would you begin dismantling your household pipes without knowledge to find a leak or would you call a plumber? Would you remove your own appendix with just a scalpel and a little alcohol, knowing roughly where it was and not having a clue what was connected to it or any hidden dangers? It is the same for professional pension advice.

It is fervently hoped not! So why would you dip into your pension or make changes to it that could affect the rest of your life without seeking professional advice?

Yet a recent analysis of FCA (Financial Conduct Authority) data for 2021-22 by Just Group shows in a study of 205,641 pensions that more than half of people did exactly that and dipped into their pensions without advice.

A financial adviser will study for a long time before they are qualified to give pension advice and many will continue to add advanced qualifications throughout their career. On top of that, they do the job every day, gaining experience and learning from more experienced colleagues.

Most people will be aware they can take a 25% tax free lump sum from their pension. But for example, did you know that if you take tax-free cash from your pension and you have any unused personal allowance, you’ll possibly have exhausted the tax-free cash allowance when you didn’t need to?

If you are still contributing to a pension and you take money out of another pension, you will limit future contributions you can pay in.

If you take a single cash payment out of your pension in the wrong way, HMRC could well think it is a regular payment and charge you excessive tax which you will need to arrange to be repaid.

When you draw money from a pension, some companies automatically draw from all the investments in the pension equally, even though there may be specific investments where wholesale disposal would be the better option in favour of retaining others.

Pensions set up correctly will pass to your beneficiary free of Inheritance Tax and free of Income Tax on subsequent pension withdrawals, so why would you access this money unnecessarily and prematurely rather than accessing other money that will be liable to both taxes?

If you didn’t know some of that and have not been able to consider your options with it in mind, why not seek advice? The government-backed Pension Wise service is free or indeed gaining professional advice for a modest fee sounds more attractive than potentially losing thousands of pounds, which can easily be the case without a careful review of your overall circumstances.

Not only that, there are consumer protection measures in place to help people negotiate the complex world of pensions and to avoid being scammed by the many fraudsters out there, something we have witnessed first-hand with many clients who have used other companies in the past, but who choose to use our own services subsequently.

So please don’t attempt appendix surgery yourself – either seek professional advice or you can contact MoneyHelper, a government-led guidance service (not regulated financial advice), by phone on 0800 011 3797 or online at www.moneyhelper.org.uk/en/contact-us/pensions-guidance.