Increased freedom could be costing UK pensioners money

An increasing number of Britons are at risk of losing money from their savings pot, as new research from insurer MetLife reveals that over 20% of people polled were not aware of the risks of cashing in their pension.

People over 55 years of age now have the option of cashing in their pension rather than investing in an annuity, with the latter option providing an income for the rest of their life. In the Wirral, around a third of the population falls into this age group.

Income drawdown involves the investment of a pension and taking cash out of the pot when it is required. More than 90,000 eligible people have taken this option, rather than buy an annuity, during the last year.

According to the study by MetLife, 10% of the pensioners were left unhappy by their decision, while one in five admitted that they did not understand the risks involved in income drawdown.

As income drawdown involves investment in the stock market, there is a risk that if the stock market falls, so will the pension value, potentially wiping thousands off what they have accumulated.
According to the research, 25% have already suffered losses from income drawdown. Half of retirees regret not taking independent financial advice, and are concerned about future risks.

The wealth management director at MetLife UK, Simon Massey, urges anyone considering income drawdown to seek professional advice before rushing to make a decision.

The Financial Conduct Authority recently confirmed that savers who decide to access their workplace, personal or stakeholder pension early would have exit penalties capped at 1%.

Sources: http://www.themoneypages.com/latest-news/drawdown-regrets-putting-pension-freedoms-at-risk/ – for MetLife survey
http://info.wirral.nhs.uk/document_uploads/Wirral%20Economic%20Profiles/Wirral_Economic_Profile_November_2015.pdf