Pension Freedom – What a Difference a Year Makes

It’s over a year since the Chancellor’s pension revolution began. There’s now more choice available than ever before to those approaching retirement and this brings with it the added responsibility of planning wisely to ensure that funds are available throughout later years. 

Whilst there had been concerns that people would raid their pension pots and blow the lot on fast cars and luxury holidays, good sense prevailed, not least because of the massive tax bill that would have resulted had they done so. Those who have accessed their pension pots have used some of their money to pay off debts, make home improvements, or pass on funds to the next generation to pay for education or a deposit on a home.

The role of annuities 

There was much media attention focused on the fact that under the changes no-one would be forced to buy an annuity. Sales of annuities fell initially, but have picked up latterly as the volatility of stock markets convinced some retirees that the certainty of income an annuity provides can be a good way to cover basic living costs.

How the cash was taken 

Not everyone opted for tax-free lump sums. One of the new methods of accessing cash from pension savings is called uncrystallised funds pension lump sum (UFPLS). This was the choice of 34% of people, allowing them to access their money in instalments while leaving the rest of the fund invested and sheltered from tax. 40% used the drawdown facility to take an income.

The way ahead 

In response to the changes, many more new products are coming onto the market, some combining income drawdown facilities with a type of annuity contract to give a balance between access to funds and a degree of financial certainty.

Tax treatment varies according to individual circumstances and is subject to change.


There is more choice than ever before…

  • Give careful consideration to your requirements and income needs in retirement
  • Think about the time scale
  • Plan wisely as early as possible
  • Consider all of the options
  • Take advice