Pension freedom also means freedom to make wrong decisions

Michelle McGagh
pension change documents ...
pension change documents ...

The government is keen to save us from ourselves when it comes to retirement, helping us save and trying to lead us on the right path when we reach old age, but at some point the hand-holding has to stop and we have to take some responsibility.

Pension savings have been dwindling over the past decade so it was no surprise that the government had to do something radical to change it and auto-enrolment was welcomed in 2012.

But the radical changes didn't stop there; in the last Budget, the chancellor announced that everyone would be allowed access to their entire pension pot as cash from age 55 and would also be entitled to free pension guidance on doing so.

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The pension freedoms and guidance service – to be known as Pension Wise – will come into force in April and while the rules around the freedoms are being thrashed out there are some concerns about exactly what role the guidance will play.
Essentially guidance will be an information service but experts fear that retirees will not realise it's only information and take it for regulated advice, make bad decisions on the back of it because they don't take proper professional advice, or don't bother with it at all because it won't give them a concrete answer about what they should do with their money.

There is much hand wringing about what will happen to pensioners who don't take professional advice and whether more should be done to help them.

I personally think we are doing enough.

The cut off

There has to be a point where the government can no longer coddle individuals, they have to think for themselves. Do they really believe they are going to get full financial advice, subsidised by the government, for free?

I think, if your retirement arrangements are complex then you should pay for advice, not expect the government to tell you what to do. People can't have it both ways; total freedom to do what they like with their pension pot (buy the Lamborghini if you want) and a government organisation to tell them what to do if they don't want the Lamborghini.

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The rule changes are all about having the freedom to make your own decisions about your money, but it also means have the freedom to make mistakes and if those mistakes are made, they will be on pensioners' heads, not anyone else's.

Do you agree with Michelle? Do we need to stop coddling people, or should we be doing more to guide people in their retirement decisions? Let us know in the comments section below.

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