In 2014 the government introduced pension freedom in the budget, coming into effect from April 2015. This enabled anyone aged 55 and over to take the whole of their pension fund as a lump sum, paying no tax on the first 25% and the rest taxed as if it were a salary at their standard income tax rate.
On paper, this sounds like a good move that could benefit many. However, there followed a lot of negative press on the back of the announcement, with some providers claiming the pension scheme changes create a major mis-selling risk.
Why is this?
Education is key
BlueSky understands that members could be at risk of overpayment of tax, being scammed (persuaded to withdraw all their pension assets for a short term opportunity), facing higher overall costs and spending too much (or retaining too little) in retirement. Educating members with the correct advice and guidance would go a long way to helping people fully understand the options available to them and the impact their choices will have.
It is vital that trustees think through the pension freedom options for their members and put in place a programme of communication to educate members on their choices before mistakes are made.
Pre-set Retirement options
Education is important and members should be presented with pre-set retirement options which have been designed to meet high minimum governance levels to be set up by pension schemes. BlueSky has a range of tools providing members with a level of support including online tools and administration teams. Pension savers are free to make their own decisions and for the pension savvy this is only a positive. However, it remains clear that more needs to be done to help those vulnerable to mis-selling.
By thinking through the options and designing innovative solutions for members, trustees can ensure they do everything possible to make sure their members fully understand every option available to them.
Make sure you watch our latest video in which our Director of Operations Jessica explains why pension freedom is positive for members.
To learn more about how BlueSky can assist you, or to speak with a member of our expert team, get in touch today. Call us on 01322 308 249 or get in touch via our contact page.