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How did pension freedoms change our approach to retirement?


Over the next couple of articles Julia Peake, of Sanlam UK, looks at how the introduction of pension freedoms affected how we approach retirement planning for clients, and how the correct investment management can help clients meet their goals and help advisory businesses too.

Since pension freedoms were introduced in 2015, clients can have a flexible retirement income strategy that is suitable for them. Plus, the advantage of passing their pension assets down through the generations free from inheritance tax. This has given advisers a great opportunity to provide their clients with a holistic plan, which covers both their accumulation and decumulation needs.

Are clients accessing their pension savings?

Recent information released by HMRC shows that since pension freedoms commenced, a total of £17.5bn has been withdrawn from defined contribution (DC) pensions. The table below shows that there has been (in most quarters) a steady increase in the number of payments and the number of individuals accessing their pensions flexibly.


Source: HMRC Flexible payments from pensions: April 2018 official statistic.

A growing need for advice

These statistics suggest the need for advice in this market is growing.  For if clients are to avoid the potential pitfalls, such as the Lifetime Allowance (LTA) at only £1.03m, annual allowance (£40,000 plus any carry-forward), possible exposure to the money-purchase annual allowance, and (for some) the tapered annual allowance, advice will be key. Especially, if they receive any other income.

What are clients and advisers telling us?

With that in mind, Sanlam recently worked with Cicero research group to find out how the retirement income market has changed, and it revealed some interesting insights:

  • Clients and their advisers start talking about funding retirement much earlier than before, with 56% of clients discussing it before their mid-40s. Prior to pension freedoms, only 28% of people discussed their retirement income before the age of 50.

  • ​Flexibility is key, with advisers reporting that 79% of clients who have some idea of what they desire from a retirement solution are demanding this.  and over a quarter of advisers saying their clients are looking for flexibility when accessing their retirement income.

  • Most clients want a multi-faceted rather than a “one-size-fits-all” approach to the management of their retirement funds, yet 42% of advisers still take a single approach to retirement income for their clients, despite this being potentially unsuitable.

  • When planning for retirement, advisers said that, on average, they will consider a client’s full range of assets for 4 in 5 of their clients.

  • The value of the retirement pot is important when looking at a holistic approach, for pots over £250,000, a more tailored approach needs to be taken.

  • Over three-quarters (78%) of advisers would consider drawdown for clients with less than £50,000. This is notably higher than the 69% reported in 2015.

  • Although annuity rates are still seen as poor value, both clients and advisers agree that the guaranteed income provided is an important part of a multi-faceted approach when providing a sustainable income and capital for the future. 

Source: Retirement Income: The Price of Freedom, Cicero

One of the over-riding themes is that clients want to be involved in the decision-making process, and they want advice tailored to their circumstances, with a multi-faceted approach to funding their retirement Once the basics are covered, clients want the flexibility of access and income to suit their needs, and this is where, as an adviser, you can help clients look holistically at their personal and financial circumstances.


With the changes to the pensions market and client engagement in this area, consideration should be given to a truly multi-faceted, bespoke approach which aligns to the client’s needs and objectives. Advisers can really add value to their clients and their families by helping them avoid potential tax pitfalls and apply the most appropriate strategy for each of their clients.

Read the next article in the series: ‘Is there more to retirement planning than pensions?’

This note is to be used by Financial Advisers only. It is not intended for onward transmission to a private customer and should not be relied upon by any other person. Sanlam accepts no liability for any action taken or not taken by an individual or firm as a result of the contents of this material. The tax treatments and information contained in this document is based on current tax law and HMRC practice as at May 2018 and may be subject to change in the future. Whilst we have made every effort to ensure the accuracy of this material, we cannot accept responsibility for any consequence (financial or otherwise) arising from relying on it. This document is for information purposes only and should not be treated as advice and independent taxation advice should be always sought.

Investing involves risk and the value of investments and the income from them may fall as well as rise and are not guaranteed. Investors may not get back the original amount invested.