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Pensions Freedom - Introduction
00:08 - Russ Mould
Ever since last March’s Budget the Government has been introducing rule changes to give savers extra pension freedoms and flexibility.
00:15 - Now whether you hold a self invested personal pension or SIPP, an individual or group personal pension the new rules on how you can use your pension pot are far reaching and they come in to force on the 6th of April 2015.
00:27 - Hello, I am Russ Mould AJ Bell’s Investment Director and joining me is Mike Morrison our Head of Platform Marketing and he's going to help explain in this collection of short videos what the pensions freedom mean to you.
00:37 - Mike, welcome thank you for your time.
So better still you're going to do it in plain English aren't you?
So here's a real challenge for you, can you start by summarising what are the key changes and what do these pensions freedom actually mean.
00:50 - Mike Morrison
I think it’s interesting that the legislation has been termed “pensions freedom”.
It’s a nice, evocative word.
00:56 - Russ Mould
It's lovely, isn't it.
01:02 - Mike Morrison
What it does mean is that from next April you'll have the freedom to access your entire pension fund.
01:04 - Let’s not forget these are defined contribution schemes as you say personal pensions, money purchase schemes not salary related schemes. You have a choice on how to receive your tax free cash.
01:13 - You can take as much or as little of your tax free cash as you want.
As much or as little of your income as you want.
01:21 - Death benefits are more tax efficient and I think because of the complexity in the whole arena the Government have committed to...
01:28 - Russ Mould
Giving extra help?
01:29 - Mike Morrison
Giving free guidance.
We mustn't confuse this with advice, this is just guidance to try to point you in the right direction and it’s up to you then to choose how you make those decisions.
01:37 - Russ Mould
Ok, so there are some big decisions because of these big changes.
I mean it does all sound very exciting the word freedom as you say is very liberating, dare one say. I mean is there a risk or a danger that people get over excited, and to use that phrase the Pension Minister Steve Webb used which he'll probably take with him to his grave, will people dash out, take their pension pot and go and buy a Lamborghini with it or do something that might not be the most sensible decision for the long run?
02:01 - Mike Morrison
I think someone much cleverer than me once said with freedom comes responsibility and I think the key thing here is while you've got the freedom to do what you want with your money you've got the responsibility to manage it in the right way.
02:12 - Look at what you want your pension money to do.
02:14 - If you've only got a small pension fund, then perhaps spending it on a cruise, on a holiday, paying off some debt, looking after the kids might be the best way to do it.
Alternatively, if you've get a medium pot and you need that to sustain your income, supplement your income for the rest of your life, do it properly.
02:30 - Russ Mould
Then it will come down to keeping the investment portfolio and how you structure that portfolio, the type of investments that you put in it and so on.
02:37 - Mike Morrison
The only person who is going to benefit, the only person who is going to suffer is you and your family, so it’s quite important that you think about it, take a step back, think about what you're doing with your pension fund and come up with a strategy that suits both you, your family and possibly your beneficiaries in the future.
02:52 - Russ Mould
Now as you say there are some massive decisions therefore to be taken, some massive issues to address you said that the Government is going to be giving some help.
Hopefully we will be in these next few videos but what is the Government actually going to be able to do for people in terms of guidance, not advice.
03:04 - Mike Morrison
Right, there has been a commitment that everybody will be entitled to a guidance session.
At the moment this is either on the phone or face to face.
03:13 - Russ Mould
Now the face to face I think there are 44 offices in the UK I think.
Is that correct?
03:16 - Mike Morrison
At the moment we've just had announced the first 44 four citizens advice bureau offices that will offer the guidance guarantee.
03:24 - Russ Mould
This is called Pension Wise
Is that right?
03:24 - Mike Morrison
Pension Wise that’s exactly it. So people will go along and be entitled to a period of time, a session to discuss some of their needs and some of the rules to point them in the right direction I think.
03:35 - Alternatively the Pension Advisory Service will offer the same service over the phone.
It will be a case I think of booking yourself in for a session, getting all your papers together and sitting down and talking to people.
03:45 - I don't think it will give you or tell you exactly what to do but it will point you in the right direction of some of the factors you ought to be considering with regard to the pensions freedom.
Do you spend your money?
Do you take out a pension for life?
Do you earmark money for certain causes?
How risk adverse are you?
What sort of investments do you understand? etc
04:06 - So for me it’s really a guidance service that's going to point you in the right direction and then you can make your decision after that as to what you do.
04:13 - Russ Mould
Now in the next selection of short videos what we're going to be doing is talking you through some of these big issues.
04:18 - The next one however we will just go through the basics on pensions right down to what age you need to be before you start thinking about these big issues so click on the next video and we will be with you in a moment.