2015’s “Pension Freedom” reforms allowed people to release their pension early, compared to previous legislation. At the time, some experts warned of the dangers, saying that people might cash in their whole pension and splurge on flashy cars and expensive holidays. More moderate voices warned retirees to think about what the likely return on their money would be if they took the cash, versus leaving it to earn more interest in their existing pension scheme. And now, two years later, the first analysis has been done to compare those two options… and it’s just about a win for those who chose to take the cash as soon as it became available.
The Telegraph reports –
“Modelling of two years of markets returns since April 2015 – when new reforms gave far more people the ability to invest their pension savings to get the income they need – lays bare the roller-coaster ride that the first retirees to take advantage of “pension freedoms” have been on. It holds valuable lessons about the challenges and opportunities of investing in retirement – particularly for those attracted to the potentially higher returns of investments who may never have previously ventured into stock markets by themselves… Retirees can take heart from other conclusions from the work – namely that diversifying investments and applying sustainable withdrawal strategies can greatly reduce short-term losses and ensure pots last.”