Archived article: This article was correct at the time of publishing. Tax, investments and pension rules can change over time so the information below may not be current.

Pensions freedom a year on – people can be trusted with their own money

It has now been a year since the introduction of radical reforms to pensions which provided savers with much greater freedom and flexibility over how they can access their pension pots.

Warnings of reckless behaviour

The reforms, while widely welcomed at the time, were also accompanied by grave warnings that some savers might behave recklessly, cashing in their retirement savings entirely to splurge on exotic holidays and other luxuries rather than used to finance their retirement. This was not helped by a throwaway comment by former pensions minister, Steve Webb, that people could choose to use their savings pot to buy a Lamborghini if they wanted to. Then Labour Shadow Chancellor Ed Balls warned that scrapping the requirement to buy an annuity altogether was “reckless and irresponsible”.

People are making sensible decisions with their pension investments

A year on we now have the benefit of real data rather than conjecture to observe how pension investors have reacted to the greater choice and flexibility available to them. As far as our client base is concerned, this suggests that much of the hysteria about the risks of giving people greater freedom over how they accessed their pension pot was unwarranted. People who have worked hard and saved all their lives towards their retirement can be trusted to make sensible decisions on how they use their own money.

Withdrawals have been modest

The Best SIPP, available through our Bestinvest Online Investment Service, is an award-winning self-invested personal pension. Of those clients who have moved into flexi-access drawdown less than 1% have fully encashed their pension and only 3.6% have taken more than half the fund. Bestinvest clients have overwhelmingly taken modest amounts of income and lump sum cash withdrawals have been within the allowance of tax free-lump sums.

The appeal of pensions has grown

What we have seen however, is an increased willingness to save into pensions, as the greater flexibility they now offer clearly makes them more appealing to investors. So while pension freedoms may have disappointed the financial aspirations of the nation’s sports car dealers, they get a thumbs up from those looking to build financial security in retirement.


The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. Past performance is not a guide to future performance. This article is not advice to invest or to use our services.

SIPPs are not suitable for everyone. If you don’t want to invest across different asset classes or don’t think you will make use of the investment choices that SIPPs give you then a SIPP might not be right for you. Self-directed investors should regularly review their SIPP portfolio, or seek professional advice, to ensure that the underlying investments remain in line with their pension objectives.