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Pension Freedoms

May 23th 2019 – Written by Jonathan Chorley

Pension Freedoms

When George Osborne introduced the pension freedom reform legislation in April 2014, it was hailed as the most far-reaching reform to the taxation of pensions since the regime was introduced in 1921 - FTAdviser - 2014 Budget: Pension Reforms

The reforms enabled individuals who had built up pension funds within Defined Contribution pension arrangements to access them ‘flexibly’ as Cash, draw them down over time, or to buy an annuity. Mr Osborne clarified this further by saying “No caps. No drawdown limits. Let me be clear. No one will have to buy an annuity.”

The reaction to the announcement was mixed, with some commentators lauding the potential for better outcomes for retirees, particularly those with smaller pension pots who had been required to buy an annuity at retirement. Alternatively, there were concerns that retirees would draw down their pension too quickly, the joke of the day being that ‘there would be a Lamborghini on every drive’.

So, four years on, how have retirees faired? The FCA launched a Retirement Outcomes Review in June 2018 and made several comments, including -

  • One in three consumers in drawdown are unaware of where their money was invested;
  • Some provides were ‘defaulting’ consumers into cash or cash like assets, which may not be appropriate over the longer period.

In terms of retirees accessing their pensions flexibly, the picture to the right demonstrates an increasing number and value of payments received since Q2 2015.

Our role in advising clients on their retirement journey in the Pension Freedom world includes –

  • Identifying a sustainable and achievable withdrawal rate for the client’s financial circumstances;
  • Implementing an investment strategy in line with an agreed risk profile that is realistic;
  • Reviewing the progress of the original advice on a regular basis to ensure that the advice remains appropriate.

If you would like to find out more about the role that we can play in your retirement journey, please feel free to contact us.

(source Scottish Widows Techtalk Issue 2, 2019)

EST. 1999