Retirement plans for 2021 have changed for many due to the Covid-19 (Coronavirus) pandemic. While some have decided to put their retirement on hold due to their savings taking a hit because of Covid-19, others are deciding to retire early after being discouraged about finding employment again when faced with redundancy.
However, what has not changed is that many employees do not fully understand their retirement income options and the risks involved; whether that be the risk of being scammed, or paying more tax in retirement than they need to, and ultimately running out of money in retirement.
This is important for employees to be aware of right now, as it may be tempting for those aged 55 and over to access their defined contribution pension early if they have an immediate need for cash. This can be especially true if employees are facing redundancy or reduced household income. However, they face significant risks if they take money out of their pension without seeking appropriate financial guidance first.
The Pensions Management Institute (PMI) is well aware of these issues and has launched a financial education and guidance service, provided by Wealth at Work, called ‘RetirementMatters’. This service will support trustees, schemes and employers through the provision of a retirement-focused financial education and guidance service.
Most employers and trustees recognise that for those approaching retirement and considering accessing their pension for the first time, it is important they understand their options and how to mitigate any associated risks. Now, more than ever, with the ongoing pandemic and impact on savings, it is important members make the most of their pensions to make informed decisions about their retirement.
Tim Middleton is director of policy and external affairs at the Pensions Management Institute