Pension Reforms Mean Good News for Retirement Savers

OPINION: Pension reforms mean greater flexibility and freedoms for those looking to access their retirement savings; adults should simply be trusted with their own cash

Emma Wall 14 October, 2014 | 5:06PM
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Scrapping of compulsory annuities purchasing and offering individuals more pensions freedoms is without question a positive thing. Annuity rates are linked to the 15 year gilt yield, which has been falling steadily over the past couple of decades. This has meant those forced to buy an annuity at retirement and fix their pension income having getting steadily less bang for their buck.

Add to that those approaching retirement have seen two massive market falls in the past 15 years, and it makes sense to be allow those saving for retirement the opportunity to recoup some of those losses by leaving at least part of their pension pot invested for longer.

Some naysayers have been calling into question the sense of allowing adults access to their own cash. While it may be tempting to splurge your pension lumpsum, Morningstar research from Australia where there is a similar pension scheme in place suggests people are not stupid with this kind of freedom.  Granted a little money initially goes on holidays, home improvements and helping children and grand-children get on the housing ladder, but the majority is used for long term living plans. After all – if you have spent decades diligently accruing funds for retirement, you have learned the habit of sensible saving.

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About Author

Emma Wall  is former Senior International Editor for Morningstar