Jessica O'ConnorTen years after the introduction of Pension Freedoms on April 6, 2015, research from Standard Life, part of Phoenix Group, revealed that the vast majority of those who have accessed their pension savings view the reforms positively.
However, as the first cohort of retirees who were able to access their money flexibly reach state pension age and prepare for potentially decades of retirement, separate research from the Pensions Policy Institute found that two fifths (41%) of retirees will be at high or medium risk of making poor decisions.
Overall, as many as 84% of those who’ve accessed their retirement savings since the Pension Freedoms were introduced say they have benefited from taking money from their pension, including 46% who feel they have significantly benefited.
Four in five (79%) said they like having the choice to access their pension in the way they would like.
Contrary to early fears that individuals would instantly spend their pension pots on Lamborghinis, the evidence suggests that individuals have used their pension money in a more gradual way – whether to ease day-to-day finances (24%), pay down debt (21%), or invest for the future (28%).
While pension freedoms have given people choice and flexibility, the next decade presents a different challenge.
The long-term impact of freedoms remains uncertain and careful planning will be critical to ensuring that people have access to greater support when making decisions about their retirement income.
Mike Ambery, retirement savings director at Standard Life, said: “Pension Freedoms have given retirees greater control over their financial future, and most have accessed their savings with restraint. It’s good to see that most retirees seem to reflect on Pensions Freedoms positively.
“That being said, it’s worth noting a couple of helpful factors that retirees shouldn’t rely on indefinitely, including the fact that strong equity market returns over the past decade have provided a strong tailwind.
“With freedom comes responsibility – people need access to the right guidance and support to take a clear view of their options and make sure their money lasts.
“As the first generation of retirees under Pensions Freedoms reach later life, now is a good time to reflect on the importance of planning, ideally with professional support, to manage savings effectively and sustain pension income for the longer-term.
“We support government and regulators in pressing on with plans for providing better help for people and making accessing retirement solutions more straightforward, particularly the ongoing consultation on Targeted Support.
“If implemented properly, this should lead to greatly improved outcomes for retirees.”
