Introduced in April 2015, the measures marked radical reforms to UK pensions which meant that anyone over 55 could have access to their pensions savings and no longer had to purchase an annuity.
Profile Pensions has found that a third of people (33%) say that they plan to take a lump sum out of their pension, indicating that the increased flexibility has appealed to consumers. Of those that plan to access cash, half (55%) intend to do so as soon as they reach 55 and 70% are planning to take out 25%, the maximum that can be accessed tax free.
But flexible options are not available universally, Profile Pensions has found that 94%* of new customers with defined contribution pensions had at least one pension that does not offer flexible access.
Michelle Gribbin Chief Investment officer at Profile Pensions commented: “It’s great to see that people are planning to take advantage of the flexible access to pension funds available to them. The fact that the majority plan to take out the exact 25% also indicates that there’s a good level of understanding around the benefits of utilising their tax-free limit. Impartial advice can be crucial to alerting consumers to details such as this.
In the current climate, many people will be under greater financial pressure than they might have expected to be. Some will be planning to draw on all sorts of rainy-day funds and of course, where suitable, a pension could be one of these options. This is a good example of where being in a flexible pension is crucial.
However, it is important that people don’t assume that they already have this ability, many customers do not when they first approach us. This is largely because people are holding on to old style pensions that didn’t benefit from the 2015 regulations. We have moved thousands of customers into flexible pensions which means they can access their tax-free cash at age 55 whilst leaving the rest invested, if that is the right option for them. We also often hear that the ability to leave a pension to a loved one is a key driver for people to transfer into more modern pensions.
At Profile Pensions we believe that pension freedoms have been a positive change and offer the flexibility that many of our customers value. These figures also highlight why it is so important that people get to know their existing pensions and take impartial advice to ensure that what they’ve got meets their needs.”
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