The Association of British Insurers (ABI) has released its ‘Five years on: future-proofing the freedoms’ report, detailing pensions freedoms.
Openwork stressed that financial advice needs to expand to help individuals to fully appreciate the options available to manage their money in the most appropriate way in retirement.
Mike Morrow, wealth and platform director at Openwork, said: “Pension freedoms gave consumers many more options and flexibility about how they manage their money in retirement.
“The increased choices around accessing pension savings as well as how the asset is treated on death mean “the pension” is probably one of the most tax efficient savings vehicles available.
“Unfortunately, many consumers still don’t fully appreciate how valuable a pension is and the increased flexibility and choice that came with the freedoms in 2015 can be perceived by consumers as complex, especially without the right guidance.
“Pension plans are now different, and the rules are now different – they are a savings vehicle that can be adapted to meet the different needs of individuals in retirement.
“It is important that consumers seek financial advice to ensure that they are fully aware of the options available to them during retirement.”
Stephen Lowe, group communications director at Just Group, added: “The reforms are popular but are they working?
“It will probably be decades before we have the full picture, when those who started taking money at the start of the new era start reaching their mid-eighties and beyond.
“These are early stages, but evidence such as high drawdown withdrawal rates from modest pensions does not inspire much confidence.
“Wealthier individuals are the most likely to be among the winners of the policy because they can afford to take professional advice and more investment risk while sheltering pension assets from inheritance tax.
“It is ‘Middle Britain’, those with small to medium-sized pension assets who depend on modest pension income to sustain their living standards, who are most at risk.
“Examples from other countries who have been in this position provide evidence that poor outcomes could be either people taking too much, too soon and running out of money too early or from hoarding to ensure it lasts and living much poorer later lives as a result.”
