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The best and worst of pension freedoms: Five advisers' verdicts

02 April 2019

It’s been four years since the sweeping reforms to private pensions, so we asked advisers what had gone well, and what not so well…

Couple on deckchairs

Chris Masters (Talking Finances)


For Chris Masters, principal planner at Talking Finances in Berkshire, the best thing about pension freedoms is the increase in options for retirement planning.

"As clients realise the range of choices they have, the conversation soon switches to possibilities and prioritising objectives. Cash-flow modelling is the natural home for extrapolating these discussions and as a financial planner you can really demonstrate your value", he says.

The firm has seen its enquiries quadruple over the past four years and has doubled the size of its team to meet demand. "Historically, people came to us at retirement for a transaction; now, they become clients for a lifetime".

Not so good

The worst part is trying to remain the gatekeeper for sensible long-term planning, often after clients have "spent some time dreaming and allowing their imaginations to run wild", says Chris.

"Agreeing objectives through the lens of wants versus needs can lead to conversations that end up in the realms of 'it's my money, why can't I spend it how I choose?'" he laments. Lamborghini, anyone?

While many clients think they can afford to spend their retirement assets faster in the belief that they will not live longer than their parents, most are conscious of ensuring their lifestyle is sustainable over a lengthy retirement, he adds.

Kay Ingram (LEBC Group)


Pension freedoms offer access to savings in a pattern that meets individual needs and are often life-changing. They have enabled renters to become homeowners and enjoy security of tenure in retirement, "something they thought was beyond their reach", says Kay Ingram, director of public policy at LEBC Group.

"The income given up by accessing a higher tax-free lump sum is often less than the rent they would have paid for life.” Ingram says. The freedoms have also enabled one client to give up work to look after a relative with a life-limiting illness. "Being able to take ad hoc lump sums allows them to spend precious time together," she adds.

Not so good

The worst aspect of pension freedoms for Kay is the restriction on future tax-relieved savings once someone draws £1 more than the tax-free lump sum. Originally set at £10,000, the money purchase annual allowance (MPAA) was cut to £4,000 in 2017.

HMRC figures show that almost one million people are so far subject to the MPAA, but Kay says: "Our experience of dealing with consumers tells us that few members of the public are aware of this obscure rule." LEBC Group has called for the non-advised to be given a cooling off period and notice of the tax payable before they commit to accepting the drawdown.

Mike Baxter (GS Group)


GS Group's Mike Baxter welcomes the public taking greater ownership of their pension assets and responsibility to plan for their future. "The best outcome of pension freedoms is that it has brought saving and spending of pensions to the forefront of people's minds," says the Perth-based adviser.

"People are finding out about their pensions earlier and actually taking steps to make sure they have a pension pot built up. Granted, some may be initiating a dialogue as they are keen to crystallise benefits, but many of these people have never sought financial advice. It gives advisers an opportunity to help and guide more clients than ever before."

Not so good

The worst consequence of the reforms is a lack of clarity among the public over the difference between 'guidance' from Pension Wise and 'advice' from a qualified financial adviser.

"New clients of mine who are attending meetings with non-qualified Pension Wise workers are under the impression that they have received free advice", says Mike. "This is not the case, and some clients could make a decision on what to do with their pension assets in the mistaken belief that they have taken advice.

"There needs to be greater distinction from the outset while booking the appointment to prepare the client on what they can expect."

Andrew Coles (Beaufort Financial)


The freedoms have led to far greater engagement with financial planning. "More people have sought advice as first time clients," says Andrew Coles, a financial adviser at Reading-based Beaufort Financial.

"Many of the clients we have advised on this matter have little or no idea what they have pension-wise, and when they discover there's a pot of money they can use wisely, they take a keener interest in financial planning.

"It enables us to provide them with financial planning advice on a long-term, rather than one-off, basis. That is good for clients and for financial advisers."

Not so good

Poor advice and scams in this area have thrust many people into an insecure retirement, says Andrew. "Few foresaw the ultra-high transfer out values from solid schemes that continue to mesmerise unadvised or badly advised people; they don't realise that markets in which they have invested their new found wealth can go down as well as up," he says.

"Badly thought-out drawdown or 'liberation' of pension assets is a ticking time bomb. Vulnerable people are most at risk of falling into these terrible traps. It has brought out the worst in unscrupulous firms whose scams honest advisers have to try to unpick."

Phil Billingham (Perceptive Planning)


Perceptive Planning director Phil Billingham was driving up the M6 listening to the 2014 Budget on the radio when pension freedoms were announced.

"My immediate thought was that it was a Budget for financial planners. Turns out I was both right and wrong," says the Essex-based adviser.

The flexibility the reforms have afforded is the greatest plus point. "The truth is that the UK now probably has the most flexible pension environment in the world, and freedom and flexibility are brilliant attributes when you are doing financial planning," adds Phil. "It gives the ability to bespoke the asset, product and tax wrapper to a client's specific needs and circumstances."

Not so good

The negatives are mounting, however.

Most significantly, many clients underestimate the double whammy of increased longevity and inflation and, therefore, the real risk of running out of money. "We have seen a switch in understanding of a pension being an income to a pension being capital, accessible to buy a Lamborghini," says Phil.

"We have also not yet seen the effect on long-term care provision of this increased access to capital. And we are yet to see the full impact on adviser firms. Ironically, the 'Budget for financial planners' is likely to result in fewer financial planners being available to provide the advice required."