Mid-life financial MOT
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The introduction of pension freedoms has arguably turned the tedium of long term savings into an exciting opportunity to reap tax advantages later in life. Pension freedoms mean employees can potentially take all of their money out from age 55. But just because they can, doesn’t necessarily mean they should. Once employees reach retirement age, they need to be able to provide an income for the rest of their life, and the tax consequences of making a poorly-informed decision can be punitive.
Pension freedoms mean that decisions about what might be the biggest amount of money an employee has ever had become much more complex. So how can the Government and pension providers educate employees so they’re able to weigh up their options at retirement?
Despite potentially being a major beneficiary of the changes through increased tax receipts, the Government clearly have some concerns over the level of freedom pension benefits now offer. Independent guidance from the Government’s new “advice” body seems set to be introduced. No one will be allowed to access their pension saving without having first received this guidance or completed an opt-out.
Whilst there is clearly value in ensuring that employees receive guidance around their pension savings, this guidance may be less effective delivered at the point that someone has decided to request a payment. Earlier financial education could be more effective in helping with future planning.
A mid-life financial MOT could have the potential to deliver a better retirement for employees. It’s something that the current Pensions Minister is very keen on and we’re piloting with our own staff at Aviva.
The concept is simply that employers offer groups of employees the opportunity to discuss the financial challenges they may face as they get older with an expert at mid-life. Doing this in mid-life means employees are armed with information before they can access their pension savings, and they still have enough time to make changes.
In 2017 we provided financial education to over 28,000 people, including our ‘My Retirement, My Way’ course which aims to help employees understand their retirement options. The idea is that delegates get a better understanding of their future financial needs and how personal taxation might affect them, and also how changes in their lifestyle might impact them too. Our financial education is offered both to employees building up their pension funds as well as those considering when and how to take their benefits.
‘My Retirement, My Way’ courses aren’t financial advice – if employees do decide they need financial advice, they can talk to an independent adviser or the Aviva Financial Advice Team.
A good retirement is one that people can take at a time that suits them, rather than having to work because of financial pressures. The right guidance, at the right time, can make a good retirement possible.
Employers are well placed to facilitate education and advice that means employees make good decisions about their hard earned savings. For help and support with financial education, please get in touch with your Aviva contact.