If people get to enjoy their small pension pots at a time and in a way that suits them, why should we object?
The one black spot looking back relates to people who were encouraged to give up their “final salary” pensions in exchange for pot of money pensions, specifically to take advantage of these new flexibilities.
This led to something of a feeding frenzy amongst certain sections of the financial advice market. Whilst some people transferred out based on expert and impartial advice and are happy with the outcome, many thousands received poor advice, often motivated by high fees, and would have done better to remain where they were.
Battles over compensation for this poor advice continue to this day.
There are two big areas of unfinished business. The first relates to advice and guidance at retirement. The Government set up a free guidance service called Pension Wise which gives people factual information about their options. But it cannot tell them what they should do.
As more people need to think about carrying on investing rather than cashing out, this “advice gap” will need to be addressed.
The second outstanding issue is what happens in later retirement. How capable will we all be of managing an investment pot into our eighties and nineties?
When we have no idea if our pot has to last for another five years or another 20, this makes it increasingly difficult to get it right. Ironically, we may see the return of later-life annuities as part of the solution to managing our money in later retirement.
Although Pension Freedoms were controversial, there are few people now saying they should be reversed.
Had the policy not been introduced, hundreds of thousands more people would have been locked into very poor annuities for the rest of their life. Instead, people can now shape their retirement finances in the way that is right for them, and even – whisper it quietly – enjoying their money.
If that is the main criticism of pension freedoms, then I plead guilty.
