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Making pensions freedoms work for savers

6 August 2020

The pension freedoms can only work well for pension savers if access to financial advice improves, according to Openwork research. 

The advice and investment network said more than half of advisers surveyed (51%) believe a lack of access to advice remains a major concern, while 56% are concerned about low levels of consumer understanding five years on from the introduction of the reforms.

Increased use of drawdown was also cited as a major issue by advisers, with more than two-thirds (68%) expressing concern about retirement savers going into drawdown without receiving advice.

The latest HM Revenue & Customs figures show more than £35 billion has been withdrawn from pension funds by over-55s since the launch of pension freedoms, with £2.3 billion withdrawn in the first three months of the year. Industry experts have warned that the Covid-19 pandemic could prompt more over-55s to withdraw cash.

However, Openwork’s nationwide study found retirement income advice was gaining in popularity, with 68% of advisers reporting an increase in demand for support in the past year.

Nearly a quarter (22%) of advisers said the biggest threat to consumer confidence within pension freedoms was the worry about running out of money. This was closely followed by 18% of advisers warning that further government changes to pension rules could hamper confidence.

Mike Morrow, wealth and platform director, Openwork, said: “Pension freedoms have been a success based on the numbers of people wanting to access their money and the demand to take cash out of pensions. But there are continuing worries about how well it is working in practice for retirement savers and advice is the missing link for making it a complete success.

“Retirement savers need help in making sure they receive the best value from their pension funds and increasing access to advice is vital to help maintain confidence in the system. The Government could also play its part by resisting the temptation to tinker with pensions regulation.”

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