So, it is often wise for client’s to seek professional financial advice if they are considering transferring or consolidating their pensions.
4. Use the pension freedoms to a client's advantage
Since 2015, people aged 55 and over with private pension savings have had much greater freedom in how they can access and deploy their pension wealth.
Before 2015, most pension holders used their pension wealth to purchase an annuity, guaranteeing a set income for the rest of their life. As interest rates have fallen, this income from annuities has also fallen.
The 2015 pension freedoms liberated the pension saver. Annuities continue to be used by many thousands of people every year. But they are increasingly used in conjunction with cash withdrawals from the pension fund, or are used later in life when the offered annuity rate may be higher.
The pension freedoms give clients choice. And this choice is more valuable than ever when the economy is volatile and prices are rising. The professional financial advice community is also expertly placed to help.
The pension freedoms are available from age 55, but there is no need for clients to act at 55.
Louis Christofides, financial planner at Saltus, said: “Pension freedoms offer the ability to draw down benefits from the age of 55 penalty free.
"This means that if you have no income between the age of retirement and state pension age, you can draw down from the taxable element of the pension up to your personal allowance of £12,570 tax free, in effect boosting the amount of tax free cash taken from the pension.
“This ability to flex income both up and down has become valuable in recent years; I was only speaking to a client yesterday who has seen her cost of living increase by £400 a month due to rising fuel costs and insurance premiums.
"We have matched this increase in costs by using pension freedoms to increase her monthly income from her pension."
5. Delay taking the state pension
While the State Pension Age is currently 66 for both men and women, rising to 67 between 2026 and 2028, it is worth reminding clients they can defer taking the state pension.
Deferring taking the state pension increases by the equivalent of 1 per cent every 9 weeks. This works out as just under 5.8 per cent for every 52 weeks. If the client can afford to wait, it may be worth recommending this value-adding option.
Charlotte Corr, chartered financial planner at Old Mill, commented: “It may seem appealing for some to defer the state pension in order to receive a larger pension income. However, it is important to understand whether or not this is in your best interests.
"You need to weigh up the larger state pension in the future, versus giving up thousands of pension income in the short term."
