View more on these topics

Claire Trott: The proof of the pension freedoms pudding

New figures show people are making the most of the freedoms, with a record-breaking number of payments made in Q3

HM Revenue & Customs’ most recent figures show a total of £21.7bn has been cashed in from pension pots since the freedoms were introduced in April 2015.

Although the information from 2015 is not complete due to changes in reporting requirements, there has been a steady increase in the funds being withdrawn year on year. Almost five million withdrawals have now been made using the pension freedoms.

April to June this year saw the peak total value of payments in each quarter of the past three years.

There was a slight drop-off in the value of payments made in the past three months but this still amounted to just under £2bn accessed via 585,000 withdrawals – the highest number since records began.

Claire Trott: Big news for ill-health pension transfers and IHT

So people are clearly making the most of the freedom and choice regime. But is such unrestricted access to pension funds a good thing? I would say yes, for more than one reason.

Right decisions
Firstly, pensions as a concept in this modern world of constant change need trust. Trust in the pensions system has been eroded over the years, rightly or wrongly. You gain trust by trusting others, in this case trusting people with their own money. The government took a bold step giving back control of pension funds to those who have saved their hard-earned money into them when it brought in the freedoms. We are still only a few years in but, while there have been some teething problems and some large sums of money have been withdrawn, it has so far not been the free-for-all that some predicted.

Secondly, the restrictions we faced before the freedoms were causing more issues for those who have built up multiple small pots throughout their careers.

Solving the lost pensions problem

Being able to dip into the funds when it suits or getting access to larger sums early on in retirement has helped many who would have been stuck paying off debts while receiving just a small pension annually. The interest saving for a lot of people must have been significant.

Drawbacks
On the flipside of all this, though, the ability to access large sums of money in a single transaction has provided an additional, lucrative target for scammers.

When income was limited, and the norm was regular income for life, scammers could not access pension funds. Now they can target individuals, coercing them to cash in their funds with the promise of better returns or more exciting investments, only to run off with them (and after they have been taxed as well).

As clients have the right to access these funds, providers may be unaware of what they intend to do with them.

But apart from education and warning, there is little else that providers can do.

There is no doubt about it, pension freedoms need to be embraced. And the government, providers and advisers need to do what they can to educate and protect the public from making mistakes.

Right now, this appears to be working, but only time will tell.

Claire Trott is head of pensions strategy at Technical Connection

Recommended

Consolidator AFH acquires Yorkshire firm for £4.5m

Advice firm consolidator AFH has acquired the advisers and clients of Harrogate-based Premier Wealth Management in a £4.5m deal. The deal will see £90m of funds under management move to AFH. Premier currently services 470 clients across Yorkshire, Bristol and Lincolnshire under director Richard Evans. Evans will join AFH along with IFAs Andrew Huby and […]

1

Phil Wickenden: Start with client goals, not risk

There are a few things in life that are better done backwards. Take moonwalking, reminiscence and Arsenal shirt wearing the wrong end of the Seven Sisters Road. To be clear, by “backwards” in that latter point I refer to the advised act of wearing said shirt back-to-front (or inside out), as opposed to the rather […]

CISI chief on kicking out qualification frauds

Money Marketing sits down with Chartered Institute for Securities and Investment boss Simon Culhane to discuss making an adviser register work, the future of pension transfer exams, and whether more professional body mergers could be on the cards. Are you still concerned about false qualifications appearing on adviser directories? What steps are you taking to minimise […]

Patient - thumbnail

Company sick pay – new findings

Research by insurer LV= suggests that some 11 million employees in the UK have no company-paid sick leave entitlement. So if an employee from within the above grouping cannot work through illness or injury for any period of time, their only income would likely be that provided by state benefits alone.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com