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Retirees who don't seek advice 'more likely to deplete their pension savings'

It pays to take professional advice about your retirement savings -- but don't just take our word for it!

New research has found that retirees who did not take independent financial advice about their pensions were more likely to fully deplete their pension pot than those who sought advice.

Since the pension freedoms were introduced in April 2015, drawdown has become a popular way for people to fund their retirement. It allows savers to take an income from their pension pot while leaving the rest invested, rather than buying an annuity. However, retirees who opt for drawdown rather than buying an annuity need to be careful to make sure their pension fund retains enough money to provide them with an income for their lifetime.

The Moneyfacts UK Personal Pension Trends Treasury Report shows that, among drawdown customers taking a regular income from their pension, almost one in five (19%) who chose to go it alone have fully depleted their pension pot, compared with just 6.8% who consulted a financial adviser.

There are also differences between the rate of withdrawals based on whether the saver took advice. A greater percentage of advised drawdown customers (33%) are taking less than 4% from their retirement savings compared with non-advised drawdown customers (28%).

Conversely, a slightly higher percentage of advised drawdown customers (31%) are taking income at a rate of 8% or more compared with non-advised drawdown customers (28%).

People who are nearing retirement or who have already retired should seek independent financial advice to ensure that they make the best decisions about their pensions for their individual circumstances.

"Drawdown has many appealing qualities for those seeking to maximise flexibility in their retirement planning but one of the key trade-offs is that individuals have to take on longevity risk for themselves," commented Richard Eagling, head of pensions at Moneyfacts.

"The fact that those individuals going it alone with their drawdown strategies are almost three times more likely to have depleted their fund compared with those taking professional advice should be a red flag moment.

"Both the Moneyfacts research and the FCA's data on withdrawal rates raise some potential alarms as to whether the current rate of withdrawals is sustainable, although it must be stressed that it is difficult to make any firm conclusions on the basis that neither data sets are able to show whether a plan holder has other pension plans or sources of income on which to fall back on."

At Fidelius, we can assist you in building up a retirement fund and balance the tax advantages of saving through pensions, against the flexibility of other options. We'll view the whole picture and can suggest strategies to access your wealth in stages, supporting those who prefer a gradual transition between full-time work and full-time retirement. And when you do retire, we can help arrange a guaranteed income for life, or invest funds to provide a flexible and potentially growing income over the years.

Get in touch with us today to find out more!

Posted on October 28th 2019

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