Are you planning to retire soon? New pension rules come into force in two weeks ...

Martin Lewis provides pension advice for the self-employed

Pension rules will change soon as from February 1, new regulations from the FCA will force providers to be more open with their customers. The new regulations are designed to protect consumers who do not take regulated financial advice, with the FCA being concerned that many consumers often make poor retirement decisions.

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For example, the regulator may be concerned by retirees converting their pension investments into cash which, over the average retirement time frame, would see a reduction in value in real terms as the return on the cash fails to keep pace with inflation.

The idea behind the new regulation means that consumers will be presented with four possible retirement objectives and, depending on which of these objectives most closely mirrors what they wish to do, will then dictate what ‘investment pathway’ they should be presented with and follow.

The four objectives are as follows:

I have no plans to touch my money within the next five years I plan to set up a guaranteed income (annuity) within the next five years I plan to start taking a long-term income within the next five years I plan to take my money within the next five years

READ MORE: State pension: How to build NI records while being unemployed

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PensionPension rules will change from February 1 (Image: GETTY)

Pension providers will need to offer a default investment solution for each of these four objectives.

They will need to ensure they are communicated clearly to the consumer, making it clear what the charges are so the holder can decide whether it suits their needs.

Jonathan Watts-Lay, a Director at WEALTH at work, commented on these plans: "In theory this all sounds like a good idea, especially because the FCA found that one in three savers that choose income drawdown without taking advice were holding all their money in cash, which means it will probably lose its value over time – and indeed, Andrew Bailey CEO of the FCA back in 2018 said, ‘Someone who wants to drawdown their pot over a 20-year period could increase their expected annual income by over 30 percent by investing in a mix of assets rather than just cash.’

"However, this also raises many issues that consumers need to be aware of.”

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Jonathan went on to warn of the various elements of pension planning consumers need to be aware of: “Firstly, it is important to check

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