We’ve said it before, but would you attempt to remove the engine from your car if you weren’t a skilled mechanic? Or perhaps fix your plumbing pipework without any practical plumbing skills?
No you wouldn’t. Even if you watched YouTube videos and read online ‘how to’ guides, you would not be as informed or skilled as someone who did it for a living.
So it is worrying, if perhaps not surprising, that a recent survey has found that almost half (49%) of those aged 55-plus who withdrew from their pension before retirement said they had not received any advice or guidance prior to making the decision.
The survey by Just Group also found that almost one in 10 (8%) of retirees who had withdrawn money before leaving full-time work had said they regret that decision, which is clearly also worrying.
The survey of 1,050 retired over-55s found that 28% had withdrawn pension cash between the age of 55 and when they finished working full time, either as a lump sum or via income drawdown.
This follows the Financial Conduct Authority (FCA) retirement income market survey, which found that 37% of people who entered drawdown in the 12 months to March 2023 did not seek or use any advice.
What is more, the number of people entering drawdown without any advice or guidance rose by 16% in the same period.
There are many reasons why people may wish to withdraw from their pension, of course. It may simply be they feel they need the extra money to get by until retirement, or their income levels have changed due to redundancy or health issues.
It may also be they wish to make home improvements, go on the holiday of a lifetime or buy a new car – we might ask whether these luxuries are ‘needed’, but we all have different priorities.
However, there may be other ways to fund these aspirations or different options that will not cause bigger issues when you reach retirement – and don’t forget a new car plummets in value as soon as it leaves the forecourt in most cases; as an ‘investment’ it’s not a wise choice.
Psychology comes into play here and it is all too easy to convince ourselves that what we think we want, or need, is the right and only choice, so a neutral adviser who is not invested in the decision can often help you to see things more clearly.
You may well feel you have a sound knowledge of all things financial. Do you know all the latest options available? Do you know the pros and cons of multiple variations, or of alternate means to achieve your goals?
In short, do you know as much as someone who does it day in, day out, for a living and stays up-to-date constantly with shifting legislation and industry trends?
If not, please consider seeking advice from and Independent Financial Adviser (IFA) before making decisions that could well affect the rest of your life.
