Only one option in Retirement – really??

Martin Lewis – the renowned 'Money Saving Expert' – got the pensions industry experts up in arms after a blatant gaffe on ITV’s Daybreak programme.

The backlash, notably on Twitter, was after Mr Lewis claimed pension pots have to be converted to an annuity in retirement. 

Daybreak presenter Adrian Chiles asked whether 'you can’t just draw the money out' of a pension when you get to retirement.

Lewis replied: 'You can't draw the money, it's a payment each year for life.' As that’s how easy ii is to land yourself in hot water if you don’t cover all the facts!

Martin Lewis – the renowned 'Money Saving Expert' – got the pensions industry experts up in arms after a blatant gaffe on ITV’s Daybreak programme.

The backlash, notably on Twitter, was after Mr Lewis claimed pension pots have to be converted to an annuity in retirement. 

Daybreak presenter Adrian Chiles asked whether 'you can’t just draw the money out' of a pension when you get to retirement.

Lewis replied: 'You can't draw the money, it's a payment each year for life.' As that’s how easy it is to land yourself in hot water if you don’t cover all the facts!

As many of our client will know, savers have two options when they hit retirement - one is buying an annuity, which pays a income for life; the other is called 'income drawdown', or more recently ‘unsecured income’.

Up until age 75, retirees can gradually withdraw cash (up to 120% of an equivalent annuity payout each year; 100% from 6 April) without buying an annuity with the whole pot. And from April, savers can carry on doing so beyond age 75.

Whilst I appreciate, especially with the changes income drawdown in April this year, that income drawdown is not a viable option for all retirees to completely dismiss it as an option is against everything we believe at Retirement and Investment Solutions.

Lewis had been invited to talk about seismic changes to the insurance industry coming this March, which means insurers will have to treat men and women equally under the new EU gender rules. For pensions, this could mean payouts to men are reduced by 10% despite their shorter life expectancy.

In answer to this Lewis warned that men risk losing £7,500 over a 25 year retirement if they 'don't get their annuity before 1 March'.

This to me is another gaffe, unfortunately Martin Lewis style of rushing everything meant he forgot even the most crucial elements, no mention was made of the different types or annuities, variable annuities, enhanced life annuities, which can increase your income by up to 30% – surprising when he is so keen to shop around for the best deal and yet he has now issued an annuity time bomb which could mean men claim any pension they are offered due to the 1 March deadline without even thinking about getting the “best deal for them”.

I appreciate he was under the immense time restrictions on daytime TV but even a caveat at the end to ensure people look at all their options would have put him in a better light. At Retirement and Investment Solutions we feel retirees need to look at all their options, keep it flexible, and above all suit your individual circumstances, something I feel was very lacking in the advice from Martin Lewis.

 

 

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