Brits have been warned to avoid making a particular mistake when it comes to their pension, as one man found out that it could lose him £80,000
UK households have been warned against making a simple error that cost one pension pot £80,000.
Whilst it may be appealing to reduce expenses on pension services, this is one area where financial advisers are urging people not to economise. Scott Gallacher, director at Rowley Turton, said: “Cutting costs by skipping financial advice can be a false economy.”
Explaining why it’s crucial to ensure all your details are accurate, Mr Gallacher recounted the story of a client who missed out on tens of thousands simply for ticking the wrong box. It comes after news of a £200 payment for state pensioners born before 1959 to be made soon.
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He revealed: “One DIY client ticked the wrong box when accessing his pension and lost £200,000 of tax-free cash – an £80,000 tax hit.”
“This was a few years ago. He had an old occupational scheme but transferred benefit not as a ‘wind up’ or ‘buddy transfer’, and lost scheme-specific tax-free cash entitlement and was then limited to 25%. Another refused to pay our £500 fee for help encashing an offshore bond, only to lose £1,500 in unnecessary tax.”
MrGallacher added: “Retiring without advice can mean missing out on enhanced annuities, costing up to 10% of your retirement income for the sake of 1% in fees. Clients also regularly overpay on mortgages by not using a broker, or stick with poor-value pensions and investments with high fees. The cost of advice is often dwarfed by the long-term value it adds – or the disasters it prevents.”
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The Money and Pensions Service reports that over 45 million individuals in the UK have private pension funds, with varying amounts set aside for their retirement. However, it seems future retirees may not have it as good as today’s pensioners.
Those retiring in 2050 are projected to have £800 or 8% less private pension income than those retiring today, according to the report. It was also found that four in 10 people are currently not saving enough money for their retirement. For those looking to start saving for their retirement years, the earlier, the better. This will give the money enough time for it to grow, leading to a larger pension pot in retirement.
Tony Redondo, founder of Cosmos Currency Exchange, warned: “Shortcuts often lead to bigger bills. Skimpy insurance policies may not cover damages, leaving you to pay big out-of-pocket costs.”