It’s hard to believe it’s been a decade since pension freedoms landed, giving individuals greater flexibility around accessing their DC pension savings from age 55.

At the 2014 Spring Budget, then chancellor George Osborne sent shockwaves through the pensions sector as he announced fundamental reforms.

Explaining people had “little option but to take out an annuity” he declared the tax rules around defined contribution schemes were a “manifestation of a patronising view that pensioners can’t be trusted with their own pension pots”.

He went on to give pensioners “complete freedom to draw down as much or as little of their pension pot as they want, anytime they want”.

And so, flexi-access drawdown was born on 6 April 2015.

Giving people choice and freedom for their retirement certainly sounds a compelling argument.

But with so much responsibility being placed on individuals, there were fears that pension savers could find themselves in a tricky situation later on if they withdrew too much, too soon.

It wasn’t so much that pensioners couldn’t be trusted; more a case of being mindful of how much was at stake

Concerns were raised that people would start flashing the cash on luxury items and could risk running out of money. Lamborghini, anyone?

It wasn’t so much that pensioners couldn’t be trusted; more a case of being mindful of how much was at stake.

When a pot of money is on the table, could the temptation to spend today with little regard for tomorrow be too strong?

We’ve all seen the stories where people who have won big on the lottery end up broke because they didn’t know how best to manage it.

Value of advice

Pension freedoms made many people realise the true value of financial advice.

Having a proper plan in place for retirement provides peace of mind. It’s about enjoying today, knowing tomorrow is also being taken care of.

Life is for living but none of us know how much life we have to live. It’s a tough balancing act of being able to confidently spend the money you’ve worked hard for and built up over decades, and making sure you have enough to see you through the decades to come.

As retirement isn’t quite as rigid as it once seemed, it’s good to have flexibility for retirement income.

Nowadays, not all of us will hang up our boots and go off into the sunset with our golden carriage clock.

Some may want to ease themselves into retirement, reduce hours, try their hand at a something new – any combination.
Those with an adviser can explore their options and plan for the retirement that best suits them.

They will be working towards financial freedom so they can spend their time and money how they want.

Retirement is one of the biggest financial decisions we will ever make. Having freedom over pension pots is great but it can weigh heavy for some, especially if they feel uncomfortable making money decisions generally.

While some of the scaremongering may have been unfounded, it doesn’t mean there isn’t anything to worry about

While some of the scaremongering may have been unfounded, it doesn’t mean there isn’t anything to worry about.

I don’t recall seeing stories about expensive car dealerships having their showrooms cleared out overnight when pension freedoms came into effect. But while most of us spend a lifetime accumulating pension savings, accessing them calls for decisions where the consequences of a misstep could be problematic or even irreversible.

I’d say almost 70% of pension plans being accessed for the first time without regulated advice in 2023/24 could be a cause for concern.

A total of 885,455 pension plans that hadn’t previously been dipped into came into play during the period, FCA data shows.

This was up 19.7% from 2022/23. The overall value of money being withdrawn was also up but plan holders taking regulated advice was, somewhat worryingly, down.

When pension freedoms came in, inheritance tax no longer applied to funds being passed on. As things stand, that’s all set to change again from 2027.

That has sparked plenty of conversations between advisers and clients.

With the cost-of-living crisis likely to be felt for some time yet, the need for financial advice is greater than ever

Meanwhile, the age at which people will be able to access their DC pensions will rise to 57 from April 2028.

Drawdown sales continue to increase. And despite Mr Osborne declaring back in 2014 “no one will have to buy an annuity”, sales of annuities saw the biggest increase in the period – up 38.7%.

On one hand it feels like hardly any time at all has passed, and on the other you realise so much has happened in ten years.

Yet we see the regulator still attempting to catch up, such as the proposals under the advice guidance boundary review.

With the cost-of-living crisis likely to be felt for some time yet, concerns around market movements and a host of tax changes to keep up with, the need for financial advice is greater than ever.

Really, it’s still early days. Let’s hope pension freedoms don’t prove too costly for those without advice.