Chris Curry: Are the pension freedoms living up to expectations?

Chris Curry

Perhaps the more important question is what expectations did we have of the pension freedoms? I am not sure, given the speed with which the reforms were introduced, that anyone had a clear idea of what they expected to happen.

However, there have been few surprises since April. Many more people have taken lump sums from pension schemes or invested in drawdown products, and fewer have purchased annuities (although it is worth remembering that some still do). But most people who have taken advantage of the new flexibilities are those who have been waiting for up to a year to do so.

There have been some wrinkles along the way. Given the inherent tension between people who waited to take their money and providers concerned that individuals might lose out by doing so (and at some point blame the providers for their losing out), guidance and advice was always going to be a tricky issue. The early days suggest that more work may need to be done to get the balance right. 

Longer term, there are more challenges ahead, especially for employers. While those who have taken advantage of the reforms tend to be those with larger pension pots who could afford to wait to take their money, over the next few years the majority of people reaching retirement with pensions will have much smaller amounts. 

The industry is likely to develop further products and solutions in the coming years that may be of more use to this group, but this will only make decision-making more complicated and increase the need for individuals to have sources of help that they trust.

Without the right help, even with pension freedoms, they might not be able to secure the retirement that they want, which could lead to many more wanting to stay in work for longer. 

Chris Curry is director at the Pensions Policy Institute

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