Knowing when to seek advice on your pension can make all the difference to building up enough savings over your working life, and ensuring you don’t run out of money in retirement.

A financial advisor can let you know what you need to do to ensure you’re on track for a comfortable retirement, and help you to make the right choices.  In some scenarios, you’re legally obliged to seek professional help, for example if you’re considering transferring a final salary pension.

Here we look in more detail at some of the reasons you may want to take pension advice, and how doing so should help ensure your retirement savings are working as hard as they possibly can for you.

When might I need pension help?

There are lots of reasons you might decide to seek advice on your retirement savings. You might be wondering what to do with your pensions because you’ve saved into a variety of schemes over the years, or you may be unsure which investments to pick based on your approach to risk and investment timeframe. Or, you might want to understand more about your options at retirement, since the introduction of pension freedom rules in 2015 which mean that you have more choice than ever from the age of 55. Read our article on Preparing for retirement: your six-step pension checklist to find out more about some of the things you might want to consider as you approach retirement.

Get a free no-obligation pension consultation

Pension advice can help you get the most out of your retirement income, helping you on your way to a secure financial future. If you have more than £75k in pension savings, take the first step by arranging a free, no-obligation initial consultation with an expert from Aviva Financial Advice. Any recommendations advisers make will be for products from Aviva and other carefully selected partners. There’s no obligation, but if they feel you’d benefit from paid financial advice, they’ll go over how that works and the charges involved. Capital at risk.

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1. I want to transfer my final salary pension

You are legally required to seek advice from an independent financial advisor (IFA) if you want to transfer your final salary, or defined benefit, pension and it’s worth more than £30,000. This is under rules set out by the city regulator the Financial Conduct Authority (FCA), and applies even if you decide not to follow the IFA’s advice.

The guaranteed income that this type of pension provides is considered extremely valuable, so transferring to a defined contribution scheme so that you have more flexibility with how you take an income from your pension isn’t usually a wise decision. Once you’ve transferred out of your final salary pension, you cannot go back, and while having your pension savings readily accessible might appeal, particularly when living costs are rising, you may regret this decision in retirement. Read more about this kind of pension in our article What is a defined benefit pension?

If your final salary pension is worth less than £30,000, you can usually cash it in under what are known as ‘trivial commutation’ rules, and there’s no legal requirement to seek advice, but skipping this could be financially unwise. There may be tax implications on receiving a large amount of money at one time, and it may still be beneficial to keep the pot for retirement for some guaranteed retirement income. Find out more in our guide Cashing in small pensions: what you need to know.

An adviser can look at your financial situation to consider the best option based on your particular pension, and your personal circumstances. Read more in our article Should I transfer my final salary pension?

2. I want to consolidate my pensions

Whether you need to seek advice depends on the type of pensions you’re thinking about consolidating, and how much you have in your pot.

As mentioned, if you’re considering transferring a final salary pension that’s worth more than £30,000 to a defined contribution pension in order to hold all your pension savings in the same place, you must talk to a financial advisor before you go ahead. Again, the FCA implemented this rule to prevent people from making unwise decisions around what can be a complex area.

However, if you’re thinking of transferring one defined contribution to another, you don’t have to seek independent financial advice. Even so, it’s not the right option for everyone and shouldn’t be a decision that’s entered into lightly.

Taking advice to choose the right pension plan for you, and making sure it’s the right decision to move one pension plan to another is usually a good idea. Read more about the pros and cons of consolidating your pension in our article Should I consolidate my pensions?

3. I want to take money out of my pension

You can usually withdraw money from your pension once you reach the age of 55. This could make it tempting to dip into your retirement savings earlier than planned, particularly if you’re struggling with rising outgoings. You can take up to 25% from your pot as a tax-free lump sum if you want to, but it’s important to manage pension withdrawals carefully, as risks include, for example, taking too much money from your pension savings too soon, and running out of money. Read more in our articles Should I use my pension to boost my income? and Should I take a tax-free lump sum from my pension?

While you’re not under any obligation to seek advice, an advisor can help you choose the right option for you to draw an income from your pension when you’re phasing retirement, or stopped working completely. A growing number of people are choosing flexible drawdown, or flexi-access drawdown in retirement. Find out more about drawdown in our guide What is pension drawdown and how does it work? and Your pension options at retirement.

Other risks of making withdrawals include pushing yourself into a higher rate tax bracket, and end up paying more tax than necessary. If you draw an income from your pension you risk triggering the Money Purchase Annual Allowance (MPAA), which reduces the limit you can pay into a pension to £4,000 a year in total if you plan to carry on paying into your pension. Find out more about how the MPAA works in our guide What is the Money Purchase Annual Allowance? Taking professional advice can ensure you manage withdrawals tax-efficiently, and so that you don’t run out of money.

You can use the Rest Less pension calculator to see a forecast of the pension income you’re likely to get when you retire, based on the current value of your retirement savings. This can include your State Pension entitlement if you want it to, and you can also see the impact of taking 25% of your pension as tax-free cash. You can amend your retirement age and the level of income you want, to see how these factors affect the length of time your pension will last.

Find out how to use our calculator and what it will show you in our article How to use the Rest Less pension calculator.

4. I want to take out an annuity

You can buy an annuity with some or all of your pension savings to provide a guaranteed income for life, or a fixed term, and you don’t need to take professional financial advice to do so. However, while there’s no requirement by law, and you can check how much you might receive using online comparison calculators, it’s often helpful to seek advice. Read more about annuities in our guide Annuities Explained.

Remember that since the introduction of pension freedoms in 2015, you are no longer compelled to buy an annuity, and it may not be the best way for you to take your retirement income. You may want to use some of your pot to buy an annuity, for example, to cover your essential outgoings, and put some in a drawdown pension to remain invested and make withdrawals when needed.

Choosing to buy an annuity with some or all of your pension is a big financial decision that will most likely have a significant impact on your retirement income. You won’t receive the same income from all providers, and there are various factors such as your health and the type of annuity you choose that impact on the amount you receive. A financial advisor can help if you aren’t sure which annuity to choose, and suggest whether an annuity is likely to be right for your circumstances.

5. I want to access my pension - but it’s fallen in value

If you’re close to, or at retirement, and your pension has fallen in value, you may want to reassess your plans.

You might want to consider using other savings before accessing your pension, or even deferring your retirement and continuing in work until your pension has time to recover its lost value. Delaying retirement could potentially enable you to increase your future retirement income by staying invested, rather than moving to lower risk investments such as bonds and losing out on future gains. Bear in mind that there are no guarantees, however, and the value of your investments can fall as well as rise.

Phasing your retirement by working part-time for a while may be an option you want to consider too. An advisor can help you to understand the best course of action for you, and make sure you’re not left with a smaller pension than you’d hoped for. Read more about the reasons you might want to defer or phase your retirement in our articles Eight reasons you might want to defer your pension and How can I phase my retirement?

What are the advantages of professional pension advice?

Taking financial advice can potentially increase your pension savings and the amount you receive in retirement in some of the following ways:

Choosing the right investments

If you’ve got a personal pension or self-invested personal pension (SIPP) choosing from the thousands of potential investments to hold in your pension can be overwhelming. Using a financial adviser can help you to choose the right type of pension investments for your timeframe, goals and tolerance to risk, and give you peace of mind that your pension is invested sensibly, and will be monitored over time. Read more about how SIPPs work in our article Everything you need to know about SIPPs and about the importance of understanding where your retirement savings are invested in our guide Where is my pension invested?

Checking that consolidating is the right thing to do

The average person has 11 jobs over their lifetime, according to the Department for Work and Pensions, and that could mean paying into a variety of different pension schemes. Keeping track of all your pensions isn’t always easy, and consolidating them into a single plan can be helpful, but it won’t be the most suitable option for everyone. Some pensions offer valuable guarantees, or impose exit penalties to transfer your pension to another plan, for example. An adviser can assess your different pensions, and work out whether consolidating them into a single plan is right for you, or whether they should be left where they are. They will also be able to help you manage the process of transferring your pension.

Deciding on the right option at retirement

Chances are, as defined contribution pensions are the most common type of pension, you’ll have plenty of decisions to make as you approach retirement, including how to convert your retirement savings into an income that will last for the rest of your life. Given the enormity of this decision, it may be worthwhile seeking professional financial advice to understand the best options for you.

Before the introduction of pension freedoms, you would almost certainly have used the money in your pension to buy an annuity, or income for life, after perhaps taking your 25% tax-free cash lump sum. This guaranteed you’d be paid a certain income, with the amount received depending on a range of factors such as your age and health.

However, following the rule changes, as you approach retirement you’ll need to decide how you’re going to produce an income from your pension savings that can be used to replace your salary when you reduce your working hours, or stop work completely. There are more options than ever, including flexi-drawdown, buying an annuity and taking cash lump sums. Some are more complicated than others, and deciding on the right one for you can feel overwhelming. Read more in our article Your pension options at retirement.

The Government’s Pension Wise service, run by the Pensions Advisory Service and Citizens Advice, provides people aged 50 and above with free guidance on their pension choices at retirement. You can give them a call on 0800 138 3944 to book a free appointment, or you can book one via their website.

It’s always worth taking advantage of a free appointment with Pension Wise, however if you want advice that’s tailored to you specifically, you’ll also need to speak to a financial advisor, as Pension Wise can only provide general guidance and not individual recommendations. In this case, our guides How to find the right financial advisor for you and How to get advice on your pension might be helpful.

If you’re considering getting professional financial advice, Aviva is offering Rest Less members a free initial consultation with an expert to chat about your financial situation and goals. There’s no obligation, but if they feel you’d benefit from paid financial advice, they’ll go over how that works and the charges involved.

Managing tax liabilities

The amount of tax you’ll pay on your pension depends on how much you withdraw, and your income tax bracket. You can withdraw up to 25% as a tax-free lump sum from a defined contribution pension, but the rest will be treated as income for tax purposes. Knowing how much to take from your pension each year while keeping tax bills to a minimum can be tricky, but a financial adviser can help you to manage this. Find out more in our article How much tax will I pay when I withdraw my pension? 

You may be able to claim compensation if a product is unsuitable

If a financial advisor recommends a product that turns out to be unsuitable, you may be able to claim compensation for ‘mis-selling’. However, bear in mind that this doesn’t extend to a poorly performing investment, so if the stock market falls, you won’t be protected against losses.

Peace of mind

Our pensions are often the most important savings that we’ll make in our lifetime, but they can be complex and working out how best to manage them and our retirement income can be daunting. Even if you have a modest sized personal pension, it can make sense to use a financial adviser to offer you support, hopefully boost your retirement savings, and take the right action to plan for your retirement. You can find out more about the benefits of financial advice in our guide The value of financial advice.

Where can I find a financial advisor to discuss my pension?

You  can find a local financial advisor on VouchedFor* or*, or for more information, including the costs involved in professional advice, check out our guide on How to find the right financial advisor for you.