It seems like an age ago that the pension freedoms came into effect following remaining Chancellor George Osborne’s shock announcement in the 2014 Budget, and we are now two months into a new world of defined contribution (DC) pensions.
Speaking to a few providers, it seems that the initial rush of calls has subsided and some semblance of calm is slowly being restored.
Before the reforms came into effect, some first feared that there would be a rush of people taking their cash in full to spend on a new Lamborghini as suggested by former pensions minister Steve Webb. Yet that fear too has been squashed by research findings.
But are annuities dead? Just Retirement has blamed the pension freedoms on seeing annuity sales drop by 37% for the three months to 31 March, and other providers have reported a similar fate.
Many employers are also amending their pension scheme default funds to offer these new flexibilities so staff do not automatically have to purchase an annuity.
According to research by Linklaters, 20% of pension schemes will offer flexi-access drawdown facilities, a higher number than many in the industry first thought.
What would I do? My first thoughts as a 24-year-old are to, of course, wait to see the size of my pension pot, but taking a lump sum and going into flexi-drawdown does sound like an attractive option. I have been saving for a year now, largely thanks to auto-enrolment, and would recommend all young employees to get involved and engage with a pension.
But will these reforms still be around when I retire? Based on political parties’ pre-election plans, had anyone other than the Lib Dems or the Conservatives been elected into power, we could have potentially seen further change.
No one knows what the future holds. More changes could come, but long may these extraordinary freedoms remain.
Robert Crawford
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