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Laura MacPhee
14 Nov

Interview With Pensions Insight’s Senior Insight Editor Laura MacPhee

 Laura MacPhee

With the UK pensions system going through a series of reforms, discussion of pensions has rarely been so popular. That’s why we wanted to catch up with pensions expert Laura MacPhee of Pensions Insight to discuss the latest goings-on after George Osborne’s announcement of freedoms for savers to withdraw from their pension pots when they like.

 

In your opinion, is it a good move to allow savers the chance to withdraw “as much or as little as they want” when they want from their pension pots?

Laura MacPhee:The policy is in-keeping with the move towards giving savers greater freedom with their pensions. It could have the positive effect of making people more willing to save more into a pension than they would if they thought it was going to be locked up for years.

The US 401k allows some limited flexibility and lets people take money out to pay for a set list of purposes, including medical expenses, educational costs, and funeral expenses. The government should look at what other systems have done when fine-tuning any new flexibilities. 

 

Pensions Minister Steve Webb has said that he doesn’t mind if savers blow their cash on a Lamborghini. Do you think that many people will take such an approach and would that concern you?

Laura MacPhee: Given the size of the average DC pension pot it seems unlikely that most savers could afford a Lamborghini.  Australian experiences have shown that people with smaller pension pots are more likely to take them as cash than people with more expansive savings. People should seek advice at retirement to see what option best matches their individual circumstances – it may well be that taking some cash to pay off debts, for example, is a sensible choice.

 

Pensions expert Tom McPhail has already warned that the new rules could create “the perfect environment for a mis-selling scandal”. Do you agree and what measures should savers take to avoid being mis-sold to?

Laura MacPhee: There is clearly a risk that savers will not understand the implications of how they decide to take their retirement income. It is well documented that people tend to underestimate how much money they will need and how long they will live, so they risk running out of money.

Savers who choose to go down the drawdown route need to ask their provider questions about how best to structure their finances and make sure they understand what they are doing and that this is not a guaranteed income for life. ​

 

You can find more of Laura’s latest comment and opinion by following her on Twitter where she’s found as @PensionsLaura.

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