Pension Freedom Advice

Pension freedom advice is needed in every case where an individual wants to access their pension early. You may have a little understanding of how this works, however, there are many pitfalls and issues that need addressing, which is why professional help should always be sought.

Professional advisers are regulated by The Financial Conduct Authority (The FCA). They are the UK’s financial watchdog set up by the government to regulate and protect your rights. There are several levels of authorisation granted by The FCA, with varying amounts of risk applied.

Giving pension freedom advice about personal pensions is not usually as risky as giving pension freedom advice regarding an old employer’s or company pension. This is because usually, company pensions come with a higher level of benefits paid at retirement and therefore taking them early could mean greater loss; because of this an additional level of permission is required by The FCA to give pension freedom advice.

This does not mean there is no risk associated with pension freedom advice for personal or individual pensions. These can also have certain “guaranteed” benefits paid at retirement, which could be lost if taken early.

Not all personal or individual pensions are the same though. Some arrangements don’t have any “guarantees” and the only loss, as such, is the fact benefits are being taken early and haven’t had the opportunity to grow further – even so, pension freedom advice is essential to make sure.

Having said this, not all employer or company pension schemes have guarantees either, which does tend to complicate the whole process of advising on pension unlocking and highlight the need for it.

It is always important to take into account that the service of pension freedom advice only applies to pensions in the UK. Taking benefits early will almost certainly reduce your pension income in retirement and is only suitable for a limited number of people and circumstances. This should not be seen as an easy option for raising cash.