Andrew J. Spillane Wealth Management Ltd

Partner Practice of St. James's Place Wealth Management


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Archived article

Freedoms under the microscope

01 November 2017

The Work and Pensions Committee has launched an inquiry into whether pension reforms are achieving their objectives.

Pension freedoms have given millions of people choice over how they use their defined contribution pension, but concern remains over whether changes are needed to make the reforms more effective.

A new investigation by the Work and Pensions Committee will examine what people are doing with their retirement savings, how they are making their choices, the information available, and the way the pension product market is operating.

“Pension freedom and choice liberated savers to choose what they wanted to do with their own money… but as with any radical reform it is important to monitor its practical effects closely to ensure it is working as envisaged,” says committee chair Frank Field MP.

The committee is seeking feedback on how pension savers can make more informed decisions and whether there are any prominent gaps in the advice and guidance market that need filling.

Among those who have added their voice is former pensions minister Ros Altmann. Whilst she acknowledges that the new system is a major improvement on the old one, she warns that “people need help to understand how best to manage their pension savings through their life course”.

“Freedom and choice are excellent reforms in theory; the problem in practice is one of lack of appreciation by pension savers of just how valuable pensions now are,” she notes.

She suggests that a lack of awareness of the tax benefits of keeping money inside the pension wrapper is a key issue that must be addressed.

“[Pension savers] may only have taken out their tax-free cash, or small pension funds, but there are powerful tax advantages to keeping the money inside a pension. Firstly, because all capital gains and income roll up tax-free; secondly because withdrawals above tax-free cash may mean losing some of the fund in tax; and thirdly because of the Inheritance Tax benefits of pensions,” she explained.

Ian Price, divisional director at St. James’s Place agrees that, while the pension freedoms offer choice, they also bring risk, especially to those who abandon the idea of getting financial advice. “The lack of understanding around the tax implications of withdrawing lump sums, in particular, remains an issue,” he observes.

“There is still a great deal that needs to be done to help those approaching retirement understand not only their choices, but the personal implications of those choices throughout their retirement years,” he adds.

Deeper focus

The committee says that too many people are making their pension choices without first seeking the right information, increasing the risk that they will not get the best value from their savings.

It says it is particularly concerned that only 7% of people aged 55 and older who are planning to retire in the next two years have used Pension Wise1 – the government-backed service that offers free guidance to those looking to take money from their retirement pot.

Separate research shows that almost half of those who attend an appointment with a Pension Wise representative go on to speak to a financial adviser, tax adviser or accountant2. This suggests that those individuals are seeking specific personalised recommendations – something that Pension Wise is not authorised to give. This is why the service is described as offering ‘guidance’ rather than ‘advice’.

“For those looking for help and information, Pension Wise is a good starting point,” says Price. “However, guidance is not enough for people to make confident choices about their retirement savings.”

“Sound financial advice – sought before, during and after the point of retirement – is the key to improving people’s retirement outcomes. I would therefore support any recommendation that gives people better access to the right information and advice,” he says.

Key industry figures, including former pensions minister and architect of the pension freedoms Sir Steve Webb, are due to provide oral evidence to the inquiry this week.


The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are dependent on individual circumstances.


1 Financial Conduct Authority, Financial Advice Market Review baseline report, June 2017

2 Pension Wise service evaluation, Department for Work and Pensions, October 2017




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