April 2018 marked the third anniversary of the pension freedoms rules, and these have proved very popular. These have given more flexibility, but they also come with more responsibilities too.

In July 2017, the Financial Conduct Authority (FCA) released its Retirement Outcomes Review, which found that just over half of the pension pots that had been accessed had been fully withdrawn, although of these more than half were transferred into another form of savings or investments – and 9 out of 10 of the pots in question were smaller than £30,000. Interestingly, the FCA review showed the main reason stated for withdrawing fully from pensions was lack of trust in pensions themselves.

HMRC’s latest statistics showing the number of payments made via ‘flexible drawdown’ in the first quarter of 2018 stand at half a million, the highest level for a quarter since the new rules came into force. For the same quarter last year this figure was just 381,000.

Before pension freedoms came into effect, only one in twenty drawdown plans were purchased without advice. By mid-2017 this figure had risen to three in ten according to the FCA. Of these non-advised drawdown pensions, the overwhelming majority of people have accepted the drawdown option offered by their current provider, rather than shopping around to find the best option to meet their needs.

We know that drawdown pensions can be complex , and they need to be looked at as part of the wider financial situation of an individual. The FCA itself has raised concerns that consumers may struggle with the complexity of moving into, and managing drawdown without seeking advice.

Given the flexibility and responsibility that has come with pension freedoms, we feel it is more important than ever to ensure that people are making the right decisions to ensure their financial security is not compromised, and to make sure that all implications and outcomes are taken into account.