Pensions after freedom: what you need to know

10 Aug 2015

  • One in three people have said they plan to withdraw their entire pot and either reinvest or spend it
  • Fewer than one in five intend to opt for the traditional annuity
  • People predict an average annual income of £10,727 from their retirement savings
  • Many new retirement plans suggest over-optimism and a lack of forethought

The widespread excitement over pension freedom was clearly shown in recent research* from and MetLife. People seized on the idea of taking full control of their retirement finances, but many may have failed to consider the long term tax and income challenges.

The 2015 Value of Advice report – conducted before the new at-retirement options became available - showed thirty-five per cent of those who aren’t yet retired were already planning to take their entire pot and either reinvest it or just spend it. Over half (56 per cent) wanted to use their money on a holiday, with other popular plans including paying off the mortgage (25 per cent) and helping family members onto the property ladder (22 per cent).

On average, people expected that they could produce an annual income of £10,727 from their retirement savings alone, yet fewer than one in five planned to stick with the traditional guaranteed annual income of an annuity.

Karen Barrett, chief executive of, comments:

‘There is no denying that the retirement landscape has changed, and what was previously a straightforward transition is now fraught with new questions. What’s clear from the research is that many people are seeing only part of the picture – they are so keen on the idea of a big lump sum and full control that they forget to think about things like tax, and what happens if their pension pot runs out. As a minimum first step people should be seeking their free guidance from Pension Wise, but for true peace of mind they should find a financial adviser to build a solid retirement plan.’

How things have changed: the issues to consider

Things to consider first:

  • How long do I expect to live?
  • What do I want to do in my retirement?
  • When should I retire? Will I continue to work, or start a new career?


How it was pre-freedom

How it is now

Final salary scheme

  • When will I retire and start receiving my pension?
  • When will I retire and start receiving my pension?
  • Should I consider transferring my pension to a defined contribution scheme, in order to access the freedom options?

Defined contribution scheme

  • How much is my retirement pot worth?
  • What is the best annuity I can buy?


  • How much is my retirement pot worth?
  • Should I buy an annuity?
  • Should I take a lump sum, and how much should I take?
  • Should I consider a drawdown scheme?
  • What are my other options?
  • What are the tax implications?

Simon Massey, Wealth Management Director at MetLife, comments:

‘The pension reforms have been a game changer for people approaching retirement, who can now spend their pension funds as they wish. However it’s essential that they consider all of the options available to them, including guaranteed drawdown, and understand the tax implications of their actions. Seeking financial advice should be a key part of the decision making process to ensure they have certainty over income in retirement.’

Karen Barrett, chief executive of, adds:

‘Those who did take professional advice before the changes were introduced in April are demonstrably more confident now, with half of them saying they were ready for the new options of pension freedom – a claim that only 36 per cent of unadvised people felt able to make.’

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Notes to editors:

* research conducted by Opinium Research between 27 February to 2 March 2015, among 2,002 nationally representative UK adults aged 18+.

For more information contact:

Anna Schirmer/ Sarah Tye/ Calum MacDougall, Lansons: 020 7294 3682

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Category: Value of Advice Tagged: pensions

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