Industry concerns persist as pension freedoms approach 10-year anniversary

Despite the success of pension freedoms, the industry has warned that there are still challenges in the form of lack of guidance and taxation, with research showing that 25 per cent of savers are unsure they understand the options and rules surrounding them.

Amid the 10-year anniversary of pension freedoms, industry experts have been reflecting on the impact of the initiative on the pension industry.

Standard Life’s retirement savings director, Mike Ambery, noted that “with greater freedom” comes “greater individual responsibility", pointing out that a number over-55s have found that pension freedoms are “overwhelming” and “the options confusing”.

Indeed, research from Standard Life found that almost a quarter (25 per cent) of individuals who are aware of pension freedoms are unsure they understand the options and rules surrounding them.

Furthermore, the research found that almost half (49 per cent) like having the choice on how to access their pension, but 15 per cent of over-55s say they feel “overwhelmed” at the options of accessing their pensions, with 7 per cent not taking from their pensions due to confusion around their options.

“The fact that retirement saving is often not seen as an immediate priority and there’s a perception that pensions can be quite complex has led to people lacking education around and engagement with their pension," he continued.

“Improving access to affordable financial advice is key to improving people’s confidence and chance of securing good retirement outcomes."

AJ Bell’s director of public policy, Tom Selby, said pension freedoms are “arguably the most significant pension tax reform in almost a hundred years”.

“Changes have been widely welcomed by savers, with more than £70 billion of pension cash accessed flexibly since 2015, according to the latest HMRC figures,” he stated.

However, in addition to a lack of guidance, Selby noted that, “there remains an issue with the way withdrawals are taxed by HMRC. Since 2015, HMRC has chosen to tax the first flexible withdrawal someone makes in a tax year on a ‘Month One’ basis.

“It is high time these systems were upgraded so people who use the freedoms as intended aren’t forced to go crawling to the Revenue to get their money.”

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