When major changes were introduced to pension and retirement rules back in April 2015, it was hard to predict what the impact would be on pensioners who were granted greater freedom to access their retirement savings.
In brief, the changes meant that anyone reaching the minimum pension age (currently 55) could take out as much of their defined contribution pension funds as they pleased. This is in stark contrast to the restrictions previously in place, as pensioners are no longer forced to buy annuity contracts once they retire.
Although the radical changes were heralded as a positive move towards freedom of choice, Martin Lewis, of Money Saving Expert, warned at the time that the changes also made it “easier to make a mistake”, and pensioners were urged to seek expert advice.
So roughly one year on, what have we learnt about pension freedoms and has it been the unmitigated success that George Osborne hoped for? Here’s how things stand.
There Was No Spike in Lamborghini Sales
Perhaps unsurprisingly, despite the hype at the time, pensioners do not appear to be cashing in their pensions and heading out on the adventure of a lifetime in brand new Lamborghini. On the contrary, it would appear that the numbers of people cashing in their whole pension has actually fallen each quarter since the rules came into effect, according to FCA figures.
Annuities Are Still Popular
According to FT Advisers, we are still seeing a huge swathe of money heading towards annuities. One reason for this is that annuities, despite not offering the best rates, do offer the level of security many pensioners prefer.
Attitudes Are Still Largely Positive
A survey of 10,000 people run by financial services company Prudential found that 44% of respondents were positive about the greater of flexibility, with 41% saying they were happy that they were now able to take control of the retirement finances.
However, greater freedom does bring with it greater complexity, and many people approaching retirement age are not getting expert advice. With access to back office systems for IFAs such as those available at http://www.intelliflo.com/, advisers are in a good position to offer unbiased recommendations tailored to individual needs.
It hasn’t all been plain sailing, however, with pension scams and complaints over extreme pension exit penalties increasing significantly over the last year.