You might not look back on 2020/21 with fond memories since most of it has been spent distancing from friends and family. But, unfortunately, the pandemic also significantly impacted people’s finances, preventing many from making ends meet.
Living within the restrictions has resulted in more people questioning where their income is coming from and searching for alternate sources to cover their living expenses. You may feel that taking money from your pension is an easy way to cover your income shortfall. However, you should consider the implications carefully before going down this route.
Track News and Legislation
Several government initiatives help business owners overcome the pandemic’s financial challenges, including grants and furlough payments. However, this help may not prove sufficient to keep some struggling businesses afloat, so the government continues to search for ways to provide support. To avoid missing out on any new schemes that come about, you should keep track of the latest news and changes to legislation about what you can claim. A great place to check regularly is the gov.uk website.
Financial support amid the crisis
Unfortunately, many people will exit the pandemic with more debt than they had beforehand. The danger is that they try to borrow themselves out of financial difficulties and end up in even more debt. Therefore, if you have any other way of bridging the gap in your finances during the pandemic, you should use it. For instance, if you have savings, investments, an emergency fund, or another source of cash, it is more preferable to use them rather than take on other loans.
Conduct a Financial Review
One good thing that may come out of the pandemic is that people will become more aware of their finances. It may come about through unfortunate necessity to make ends meet, but people will discover the value of their assets and how easily they can liquidate them for cash.
Steering a safe passage through the troubled waters of these uncertain financial times can be a significant challenge. An excellent way to help get the best out of your financial affairs is to consult with a regulated financial adviser. They can talk you through the best use of your assets during times like these.
Pensions Advice and Support
Receiving advice and support regarding your pensions is particularly crucial during times of financial uncertainty, as you may make rash decisions and regret them in the long run. Following government legislation passed in 2015, you now have greater freedom regarding what you do with your pension pot from the age of fifty-five. This freedom will allow many people to choose to use their pension fund to get them through the financial stresses of the pandemic.
Depending on the type of pension you have, you can now take as much money from your pension as you wish. Alternatively, you can leave your money invested in your pension to provide an income. If you choose to take your funds in lump sums, the first 25% is tax-free. After that, however, any amount you take over is subject to taxation. Therefore, be wary of taking more, as your tax status could be significantly affected. In this situation, a regulated financial advisor is priceless.
Pension Advice & Guidance
At first, glance, having the facility to take money from your pension pot may seem appealing. However, before making any decision, you must consider how a reduction in your pension funds will affect your retirement income.
The implications are potentially so severe that the government introduced a guidance package for people considering pension freedoms. This guidance is available on the Pension Wise and Pension Advisory Service websites. Both of these resources are free, and they will provide you with guidance on the options available to you regarding pension freedom.
However, you should understand that these sites are for general guidance only, and you will not be able to receive advice regarding your specific financial situation. To get such support, you will need to speak with a regulated financial advisor. They can look at your pension schemes and discuss your options for achieving the financial goals and aspirations for your retirement.
Living with lockdown and the restrictions of the pandemic has been challenging for many people and devastating for some. In addition, it has resulted in more people uncertain about where their income will come from and looking for alternate sources of money to make ends meet.
If you are over fifty-five, one such source of income could be your pension fund. Thus, reviewing your funds could remove any worries you have of getting through the pandemic financially intact.
If you are nearing retirement, your pension funds will be close to maturity. Therefore, now could be a good time to access this money, particularly if it avoids you taking on significant debt.
However, pension freedom is not ideal in every situation. For example, taking money from your pot early could jeopardise your income during retirement. Also, taking too much can leave you with a hefty tax bill. Therefore, ensure you speak with a regulated financial advisor before deciding what to do with these precious retirement assets.