History is written by the victors. So when the Chancellor described pensions freedom as a success last week, he was absolutely right.
The victors of pensions freedom are savers. Despite the teething problems of the past two months, the changes will be remembered as a success for consumers, and for choice.
Yet many of the big beasts of the pension world see choice as a threat.
They’ve responded by muttering darkly about the consequences of people being free to choose what they do with their hard-earned nest eggs.
Worse still, some are being accused of putting obstacles in the way of customers who want to exercise their new-found freedoms.
Iain Duncan Smith, the Work and Pensions Secretary, has suggested that some companies “appear to be dragging their feet.”
Domino effect among ungracious losers?
This month Friends Life announced that it is to reduce the pension freedoms on offer to its clients. Its U-turn on flexi-access drawdown could set a worrying precedent.
While we must take Friends Life at its word that it genuinely intended to offer a flexible drawdown option to its clients, it’s clear that many of the life companies were only reluctantly planning to offer the full range of freedoms.
For many of them, being forced to offer a wider choice of options to customers flies in the face of a business model which for decades has been worthy of Henry Ford - with its mantra of ‘customers can have their savings any way they want, as long as it’s via an annuity’.
So let’s be clear - the grousing from the industry about pension freedom is motivated largely by self-interest, not concern for customers. And it has all the hallmarks of a rearguard action fought by ungracious losers.
But nevertheless there’s a danger that Friends Life’s decision to break ranks could cause a domino effect. Other pension providers could follow suit in reducing the options they offer to their clients, reassured by the knowledge that they are not the first to do so.
Breaking news – the sky hasn’t fallen in.
The likelihood is that many of the 60,000 people who’ve chosen to exercise their pension freedoms since April did so with good reason.
With the average size of pension pot being encashed a modest £16,600, many would have got a pittance if they’d been forced to buy an annuity. So who can blame them for wanting to try something different?
To my knowledge, Lamborghini hasn’t been swamped with grey-haired buyers since April. It’s likely that most of those using their freedoms are exploring the full range of options – from formal drawdown to ad hoc withdrawals from their pots.
I realise this doesn’t make great newspaper headlines, but the truth is most people haven’t seen pensions freedom as a green light to blow their life savings.
Of course freedom of choice also means the freedom to get things wrong.
As every 17-year-old excitedly sticking L-plates onto the family car is told, with freedom comes responsibility.
But the modest figures announced by the Chancellor suggest that when offered the freedom to do with their pension savings as they will, most over-55s have been responsible.
Yes, it’s essential that people take professional advice before taking irreversible decisions with their savings.
But the doom-mongers who predicted a tidal wave of withdrawals have been proved wrong. For all the grumbling by the industry’s old guard, the pensions revolution has come too far, and is too popular, to be reversed.
Customers’ freedom to choose is a victory in itself. And it is they who will write the history of pensions freedom – and record it as a success.
John Fox is director of Liberty Sipp.
