Pension Wise ? your money your choice
13 January 2015
Pension Wise is the name of the guidance guaranteed by the government to help individuals with their pension choices when changes commence in April 2015.
When the changes to pensions were announced at Budget 2014 the government said all retirees would have the right to free, independent guidance on their retirement options from April 2015.
If you are 55 or over and have a defined contribution pension (a pension based on how much has been paid into the pot), it is your decision how you take the money.
Pension Wise will be the free and impartial service to help you understand what your choices are and how they work. Help will be available on the Pension Wise website, over the phone or face to face about:
- what you can do with your pension pot
- the different pension types and how they work
- what’s tax-free and what’s not.
Dashboards and Jam Jars
The new pension rules will enable those over 55 to take as much money as they like out of their Defined Contribution (DC) schemes at lower tax rates and according to a discussion paper Dashboards and Jam Jars published by the charity Age UK, individuals could potentially use up their savings within ten years.
The discussion paper is all about helping consumers with small DC pension pots make decisions about retirement income.
The paper recommends that consumers should be provided with a Pensions Dashboard which should be able to gather data electronically from all their schemes. The Dashboard should display details of all of the consumer’s DB and DC schemes in one place alongside their State Pension entitlement.
The paper also recommends that pension providers should develop new tools ‘Pensions Jam-Jars’ to help people budget, control their spending and set aside money for future goals. These could also help them manage the inevitable trade-offs and conflicts which exist when taking a retirement income. These tools could help consumers decide how much money to take out of their pension each year.
Full state pension?
According to a report by Professional Pensions a freedom of information (FOI) request from Hargreaves Lansdown found just 45% of people retiring between 2016 and 2020 would actually be entitled to the full state pension. Up to two million people could miss out on the weekly £148 because they were contracted out of the second tier state pension or had gaps in their National Insurance contributions.