The pension freedoms were introduced last April as a way to give retirees the chance to access their savings how and when they want to, reducing tax barriers and removing the obligation for many savers to buy an annuity. As it turns out, it's had the desired effect, with official figures showing that more and more people are taking advantage of the freedoms.
The figures, from HMRC, show that 159,000 people have flexibly accessed £1.7 billion from their pension pots since April this year. This takes the total value of payments accessed since the scheme's launch to over £6 billion, split across 772,000 payments, highlighting the huge uptake of the new freedoms.
Not only that, but many people are benefiting from Pension Wise, the Government's free and impartial guidance service. Indeed, over 2.7 million visits have been recorded to its website and 75,000 appointments have been made, which hopefully means that more people are able to make an informed decision when it comes to their pension savings.
This isn't where the reforms stop, however. Far from it – the Government has also announced plans to launch the so-called secondary annuity market, allowing annuitants the chance to sell the income from their annuities from April 2017, subject to the provider's agreement.
This is designed to give those already locked in annuity contracts the same freedoms as new retirees, and while it's largely felt that selling such a contract won't be right for the majority, it's still being regarded as a welcome move to help level the playing field.
There are also plans afoot to protect customers by capping early exit fees – a great way to encourage more choice and freedom in the pensions sector – as well as allowing earlier access to Pension Wise guidance, and an industry-wide pensions dashboard could also be on the cards, too.
The Economic Secretary to the Treasury, Simon Kirby, commented on the update:
"It's only right that people should have a choice over what they do with their money, and today's figures show that pension freedoms continue to be a popular choice.
"Our pension reforms have already given hundreds of thousands of people access and responsibility over their hard-earned savings, and we will continue to make sure that the pension freedoms work well for everyone.
We will work with our partners, such as Pension Wise and the Department for Work and Pensions, to ensure consumers are protected and that there is clear information to help people understand their options."
Could you benefit from access to your pension pot? It could be a beneficial move, but it's still important to consider the risks involved. After all, with freedom comes responsibility, so it's vital to make sure your income lasts throughout retirement – and it's worth remembering that an annuity is still the only way to guarantee that.
Seeking advice is key, be it through Pension Wise, an independent adviser, or ideally a combination of the two, and that way you'll be perfectly placed to take advantage of the freedoms.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
Moneyfacts.co.uk will, like most other websites, place cookies onto your computer’s
hard drive. This includes tracking cookies.