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Retirement Savers Insisting On Managing Their Own Money Via Pension Freedoms
Published: | 5 Nov at 6 PM |
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Many UK retirement savers are now insisting on managing their own money.
Arguments are now ongoing between pension regulators, financial advisors, pension providers and savers themselves as to the ifs and buts about transferring to a defined contribution scheme from a defined benefit pension, with savers wanting more control over their own money and the timing of their retirements. The major reason why pension savers wish to transfer is the pension freedom legislation which allows cash drawdowns from the age of 55.
Defined benefit pension schemes are usually offered under the umbrella of workplace pensions and include advantages such as index-linked lifetime-guaranteed payments, spouse pensions and guaranteed annuity rates. Britain’s Financial Conduct Agency’s default position is to support them as it feels savers will be worse off outside such a scheme, even should employers offer financial incentives to transfer out. On the other hand, defined contribution schemes are not guaranteed, as pension payments are calculated using the value of the fund, the which is liable to fluctuation.
The introduction of pension freedoms in 2015 has proved very popular with those looking to early retirement, with savers withdrawing £30 billion from their pension funds to date. Savers, it seems, are keen to legally move or manage their own money however they please. Another issue is that neither scheme is a guaranteed safe haven for pension savers, as direct benefit schemes rely on the financial viability of the employing company. Should an employer not ensure its scheme has the funds to give full entitlement to subscriber members or should the company go bankrupt, the Pension Protection Fund gives some relief, but compensation is unlikely to be the full amount due.
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