Personal Finance

Pension changes: ‘savers should wait to cash in nest egg’

Savers who suddenly have access to their pension pot next week might benefit from waiting for up to ten years before withdrawing their cash, pensions minister Steve Webb has suggested.

From 6 April, people aged 55 and over, with a defined contribution pension, will have more freedom over how they take money from their retirement fund.

Webb, the Liberal Democrat pensions minister who drew up the plans, suggested that people should wait until the industry has caught up with the huge changes so they can make the most of their money.

“This is a whole new world. Somebody talked to me about a decade of innovation,” Webb told The Sunday Times.

“So the new products, the flexibilities – keep a bit of money invested, take a bit of cash, have an annuity at the end, all that kind of stuff – are evolving.”

Webb said that savers who return to their pensions later on may well have a whole set of choices that would fit them better.

Asked if he was specifically telling savers to wait for a decade, he said: “What I am saying is these are still big decisions, long-term decisions, and taking a bit of time to get it right seems sensible to me.”

He added that only those who are “champing at the bit, desperate to get the cash” should act immediately.

Webb, who once joked that pensioners were free to blow their money on Lamborghinis, dismissed fears that savers would suddenly squander their money.

“Serious-minded people who are frugal while they are working – and everyone else is spending – do not then tend to become spendthrift types when they are 55 or 60,” he said.

Around 500,000 people have already contacted Pension Wise, the government’s new guidance service, which opened last month. Webb said this advice, which is available over the phone or online, will stop people making costly mistakes.

New figures show that up to £140bn of pensions could be accessed by savers – an average of £25,000 each. Those wishing to take money from their defined contribution pension pot can take up to 25 per cent tax free.

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