“As we head into the second year of pensions ‘freedom and choice’ some of the initial excitement has worn off to be replaced by what seems to be a more practical attitude. Pent-up demand for full cash withdrawal that resulted in eye-watering amounts of money being stripped out of pensions has moderated.
Guaranteed income solutions remain in demand – although the FCA figures show the numbers slipped 9 per cent from the previous quarter, this is much less than the 36 per cent overall fall in pensions being accessed and 42 per cent fall in full cash withdrawals.
“Perhaps the biggest change over the last 12 months has been a change in the attitude towards supporting retirees faced with making some of the most complex financial decisions of their lives. In the run-up to the pension changes, the attitude seemed to be one of laissez-faire – it’s your money so you can do what you like with it. Since then, perhaps because of volatile financial markets hitting pension fund values, there has been a growing sense that many people perhaps aren’t well equipped to make these decisions alone.
“That was reflected in the Budget with the announcement of the Pensions Dashboard and an overhaul of the services provided by Pension Wise, The Pensions Advisory Service and Money Advice Service to ensure better information and guidance. The idea of allowing retirees to use some pension cash for professional advice is a continuation of this theme towards a higher level of support.
“Income drawdown has to be handled carefully and no new ‘magic bullet’ product has yet – or is likely to come along – to give retirees higher incomes and more flexibility while taking less risk. After a year we can confidently state that the future looks very like the past: pensions remain among the most tax efficient homes for money that will be needed for life after work.”
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