Going into reverse?

Since the ‘Freedom and choice’ reforms were introduced in April 2015, anyone retiring with a defined contribution pension has had the liberty to sidestep annuities, keeping their pension fund invested via income drawdown, or taking cash out of their pot.

Has this change in regulation led to further confusion for pensions?

In general yes. Although the changes in pension regulation have come as a welcome change for individuals, the knowledge and understanding of what you can and can’t do with a pension still remains a hot topic and an area of some complexity and misunderstanding.

The resurgence in annuities

Challenges in the world economy and recent drops in equity markets could be behind a revival in the popularity of annuities which may signal a change in consumer sentiment and the preference for a more stable income in a volatile, low interest environment.

Members of the Association of British Insurers (ABI) sold 21,000 annuities compared to 19,500 drawdown products in the last quarter of 2015. This follows a six-month period during which drawdown products consistently outsold annuities1.

Thinking ahead

Annuities will remain a feature of retirement in the UK, despite the fact that people can now use their pension how they like, however there are concerns that some people may start to access unsustainable levels of cash once their tax-free personal allowance is reset in the new tax year.

“Cashing in might be appropriate in some circumstances, but advice is the key to understanding the merits of each option,”

1 www.abi.org.uk, 28 March 2016