6 things we've learned from 10 years of pension freedoms

This month marks 10 years since the introduction of 'Freedom and Choice' reforms, commonly known as pension freedoms.

The changes were brought in by then-Chancellor George Osborne in 2015, revolutionising the retirement system and the income choices available to millions of people.

Here, we've highlighted six ways the reforms have changed the retirement landscape and how we manage our pension savings. 

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What are pension freedoms?

Pension freedoms were introduced in 2015, and applied to anyone with a defined contribution (DC) pension. The idea behind the new rules was to give savers more flexibility and control over how they fund their retirement. 

The reforms stipulated that people didn’t have to annuitise their pensions anymore. Instead, savers could remain invested in income drawdown or even take pensions as a cash lump sum.

The tax rules that applied to pensions on death were also revised. New rules were introduced that made it possible to pass on your retirement pot completely tax-free if you died before the age of 75.

Savers have duly changed their behaviour over the past decade. The latest figures from the Financial Conduct Authority (FCA) show that in 2023-24, 53% of pension plans were fully encashed, 32% were used for drawdown, 9% were converted into an annuity, and 6% were used for UFPLS withdrawals.

Here are six ways pension freedoms have changed the way people save for retirement and how they take their pension when they stop working. 

1. Pensions have become more relevant (and complex)

The initial announcement of the new rules in 2014 and implementation in 2015 put pensions in the spotlight and underlined the fact that producing sufficient retirement income was partially the responsibility of the individual. 

This followed the introduction of auto-enrolment in 2012, which brought many more employees into the world of pensions. The upshot is that people have had to be more engaged with their pensions and sometimes consider investment risk in relation to their retirement savings. 

Passing on unused pensions to younger family members became tax-efficient, although this will change again with the new inheritance tax rules in 2027. Further tweaks about what you could put into and hold within your pension over the past decade have added to the existing complexity. 

• Find out more: pension auto-enrolment: how it works

2. Drawdown is now on the radar

Up until 2015, pension drawdown, or income drawdown as it was more commonly known back then, was really only suitable for more affluent retirees.

With pension drawdown, you keep your savings invested when you reach retirement and take money out whenever you choose. This flexibility is a big selling point, but it's your responsibility to carefully manage withdrawals so your savings last as long as they need to. 

The product has now firmly entered the mainstream. Nearly 280,000 new drawdown plans were opened in 2023-24, which represented around a third of pensions accessed for the first time in that year. 

There have been concerns that people are withdrawing too much money from their plans. In 2024-25, more than 40% of pension drawdown plans had an annual withdrawal rate of 8% or more. Around 4% is the accepted norm to ensure funds aren’t depleted too soon. 

• Find out more: pension drawdown calculator: making your money last

3. Annuities have declined, but are bouncing back

With people no longer obliged to purchase an annuity with their pension savings, the expectation was that new sales would fall off a cliff. 

Buying an annuity involves swapping your pension savings for a guaranteed regular income that will last for the rest of your life. How much you get is determined by the annuity rate offered by the provider and your personal circumstances. 

The market did shrink considerably at first. Annual annuity sales dipped from 420,000 in 2012 to a low of under 60,000 in 2021.

There has been a partial recovery in the market, with more than 80,000 new annuities bought in 2024. High interest rates and gilt yields have boosted the income levels offered by providers. 

A 65-year-old with a £100,000 pension can currently get around £7,750 per year from a single-life level annuity.

If you take out an annuity as a result of using the service from HUB Financial Solutions, Which? will earn a commission to help fund our not-for-profit mission. 

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4. Combining your pensions has become more attractive

The introduction of auto-enrolment and pension freedoms created a situation where savers have more pension pots, are dealing with more providers and have more decisions to make when turning their retirement savings into income.

A new breed of pension ‘consolidators’, such as Pension Bee, has emerged, encouraging you to combine your pensions in one place. 

Keeping track of and managing your pension savings is easiest with just one scheme. You'll also pay less in overall charges if you put your money into a pension with competitive fees compared to plans with high charges – there is no point consolidating your pensions into one scheme which applies high charges. 

A self-invested personal pension (Sipp) is a do-it-yourself pension, which you can combine your other pensions into if you so choose. You'll be taking on responsibility for choosing and managing your own investments, so you'll need to have the time and confidence to do this.

• Find out more: should I combine my pensions?

5. 55 has become a key age

The age of 55 has become a key point in your pension journey. You were able to access workplace or personal pensions at 55 before 2015, but compulsory annuitisation meant that there wasn’t much to decide, and buying an annuity at that point wasn’t usually a good idea. 

Now you would be expected to make some major decisions, often at a relatively young age, without much assistance. Recent research from Standard Life highlighted that those who’ve accessed their retirement funds since pension freedoms did so at an average age of 60. Notably, 46% said this was earlier than planned.

So what support do people have faced with increasingly complex decisions? A new guidance service for the over-50s – Pension Wise – was announced at the same time as the Freedom and Choice reforms. 

Many savers are opting for pension drawdown without first seeking advice. If you have to make more complex long-term decisions about your finances you probably need to see a financial adviser and pay the necessary fees. You can find an adviser using the directory from Unbiased.

• Find out more: how to plan for retirement

6. Scammers are a bigger threat

Allowing people more flexible access to their retirement savings comes with a downside. With savers now cashing in large amounts of money or moving funds around, the new opportunities have caught the attention of fraudsters.

Scammers will offer people a free ‘pension review’ and push high-risk, unregulated investment products that promise lucrative returns over short periods of time. The money can disappear entirely, and your retirement pot will be gone forever. 

There are a few red flags to look out for to ensure you don’t fall victim to scammers:

• Don’t be tempted by unsolicited calls, texts or emails – a pensions cold-calling ban has been in place since 2019.
• Unregulated offers on social media are another ‘no no’.
• Anyone claiming that they can get you early access to your pension is likely to be a fraudster.
• Investment offers guaranteeing large returns over a short period of time are usually dubious at best.
• Only deal with regulated companies and individuals if you want to retain some protection – you can check out if companies are regulated by the FCA using its financial services register.