Advice on pensions? Do you regulate it or does my response  do?

I have a request from a major newspaper as to what I’d say to someone at retirement. Her questions are in bold , my answers are in blue. I don’t think my responses are precise enough. I’m sure that Steve Webb and many others would have done better.  But this is what I would say if I didn’t know much about the person I was speaking with. I hope that sharing my experience and time doing this is relevant and doesn’t break rules

What are the most important things for people to know about their pension planning that they might not already be aware of?

We think of retiring in terms of the next few years, but it’s a lot longer than that for most of us. If we make it to state pension age (66) we are likely to live into our mid 80s and more of us are living well beyond that. The pension is the income that replaces what we earn and many of us will work and spend our pension in our late 60s , this gets harder as we get into our 70s and beyond.

What are the aspects of pension planning that people tend to least understand or be aware of?

Pensions are hard , they’ve been called the “nastiest hardest problem” especially to make a pot of money last as long as we need to spend it.

What problems can arise from people not understanding how best to plan their pensions and what are the solutions?

Put simply – people tend to underspend or overspend when in the early years of retirement and find themselves with too small or too big an income as they grow older.

What can people do to better understand pensions if they don’t have a financial adviser?

 They can join collective pensions which aim to last as long as you do. Right now you can buy annuities from insurers but these do not give great value for your money. We hope to see “pensions” return that give you exposure to better investments so your pension can grow over time and match inflation.

What aspects of pensions could be disastrous if people don’t understand these? 

The disasters happen in the second half of retirement if people take too much or too little risk. Pensions need to be understood when purchased, people need to plan for themselves first but also for people who may depend on them. They need to have a plan to cope with inflation and an income that lasts as long as they do. You may need help, but you’ll certainly need a proper pension or annuity company to purchase from. Buying without the help in the market could be disastrous.

What are the main challenges if people don’t understand pensions – what could the outcomes be?

A DIY approach to pensions is not something to be taken on unless you know what you are doing. I am a pension expert but I would not DIY my pension income, I’d give my money to someone who or an organisation which understands my circumstances. For most of us, a collective solution where we share risks with others is the best starting point.