Mr Bradshaw also suggests another problem was the perception that not only were annuities poor value but that the customer was tied.
“Because most people didn’t exercise an open market option, they just rolled over and took an annuity with the provider they had the DC arrangement with, so there was no shopping around,” he says.
Mr Osborne certainly grasped the chance to shake up the pensions industry.
“In 2014, the chancellor spotted an opportunity to address this and to make a politically popular move at the same time within that year’s Budget speech, and announced that people would be able to withdraw their entire pension fund as a lump sum,” Ms Tait says.
“The result is now that anyone who has reached the minimum age of 55 can choose exactly how and when to access their pension benefits, allowing them to use their pension plan to meet different financial needs and to tailor their retirement income to their own personal circumstances.”
The reforms certainly did what they said on the tin, which is to free up pots of money that otherwise went into the hands of the insurance firm who was providing the annuity.
As Mr James puts it: “The freedoms have changed things by removing the perception that annuities are the only option available, and that it is only possible to start taking funds out of a pension at a fixed point in time.
“The changes have reinforced the belief of savers that pensions are their own money and they can make their own choices over what they want to do with those funds.”
Verona Smith, head of platform at Seven Investment Management, believes pension freedoms are a boon for everyone.
“What pensions freedoms should mean for every single worker in the UK is that they now have clear visibility and choices available to them for their hard earned pension savings.
“No longer are they locked into something called an ‘annuity’, which for many people may be a good thing but everyone should have choices.”
Scott Gallacher, chartered financial planner at Rowley Turton, points out drawdown “may have become more popular anyway, given the relatively low income being offered by annuities”.
“Pension freedoms perhaps just gave it another boost,” he adds.
More choice, more risk?
For many, the annuity remains the best option as it promises a guaranteed income for life.
One of the advantages of the product which made it popular in the first place is it means the retiree can take a step back. Other than to choose an annuity product in the first place there are no ongoing financial decisions to make.
