The pension regulator has loosened long-standing rules governing how retirees use their pension pots. The changes give savers much more control: fewer forced annuity purchases, no lock-in periods, the option to invest up to age 85, new systematic withdrawal mechanisms, and permission to hold up to 100% in equities. These are some of the most significant shifts in retirement policy in years. They promise flexibility and higher potential returns, but also raise fresh risks that savers and the industry must manage.
What exactly has changed?
- Reduced mandatory annuity purchases — Retirees no longer face the same requirement to convert a fixed portion of their pension into a guaranteed annuity.
- Lock-in periods removed — Pensions can be accessed or moved without the old restrictions that made funds inaccessible for set periods.
- Investment allowed until age 85 — Pension pots can remain invested in the market for longer, rather than being forced into low-risk vehicles at an earlier age.
- New systematic withdrawal options — Regular, scheduled withdrawals can be set from pension funds, supporting steady retirement income without purchasing an annuity.
- Up to 100% equity allocation permitted — Funds can be fully invested in equities if a saver chooses, increasing potential returns and volatility.
Why this matters for retirees
The old rules emphasised guaranteed income above all else. That reduced exposure to market risk but often left retirees with low real income, especially in a low-yield environment. The new approach shifts the balance toward choice and potential growth. For many, that means:
- Greater potential to grow pension assets in retirement by staying invested.
- More control over how and when income is drawn, supporting tailored retirement lifestyles.
- Improved liquidity — easier access to funds when unexpected costs arise.
At the same time, the freedom to chase returns comes with trade-offs. Staying invested longer exposes savers to market downturns late in life, and high equity allocations can amplify losses just when capital is needed most.
Benefits: flexibility, income management and growth potential
Systematic withdrawals let retirees plan a predictable income stream without buying an annuity. That can be useful for those who want flexibility to leave money to heirs or adjust spending over time. Allowing investment until age 85 and higher equity weightings can also help retirement savings outpace inflation — an important advantage when life expectancy continues to rise.
For financial institutions, the changes open opportunities to design new products: glidepaths that reduce risk as savers age, drawdown plans that combine income with capital protection, and managed solutions that target sustainable withdrawal rates.
Risks: behavioral pitfalls and market exposure
Greater choice often means greater responsibility. Many savers struggle with complex decisions, especially when emotions and short-term market movements are involved. Potential pitfalls include:
- Sequence of returns risk: Heavy losses early in retirement can permanently damage a portfolio that is funding ongoing withdrawals.
- Overconfidence: Opting for 100% equities may seem attractive after a bull market, but volatility can quickly erase gains.
- Poor timing: Removing lock-ins increases the risk of withdrawing at the worst time or chasing returns.
Without clear guidance, these risks can translate into lower lifetime income, earlier depletion of assets, or anxiety for retirees and their families.
What advisers, providers and regulators must do
The burden of choice makes good advice and product design essential. Financial advisers, pension providers and regulators should focus on:
- Default, safe options: For those who don’t choose actively, well-designed default plans with lifecycle risk management can prevent costly mistakes.
- Clear communication: Simple explanations of trade-offs, fees and risks help people make informed decisions.
- Guided products: Solutions that offer managed drawdown, phased de-risking and caps on withdrawals can balance flexibility with protection.
- Financial education: Better tools and calculators to show how different strategies perform under stress scenarios.
- Monitoring and safeguards: Regulatory oversight should ensure providers meet standards and retirees are not mis-sold high-risk strategies.
How retirees should approach the new rules
Choices under the new regime are best made deliberately. Practical steps for savers include:
- Assess personal longevity, spending needs and risk tolerance before changing investment strategy.
- Consider mixed approaches — some guaranteed income for essentials and a growth sleeve for discretionary spending.
- Use systematic withdrawals tailored to a sustainable rate to avoid depleting capital too quickly.
- Seek independent advice or use regulated advice channels where possible.
- Review plans regularly, especially after major market moves or life events.
Bottom line
The regulator’s reforms mark a clear shift: from a one-size-fits-all, protected-but-limited model to one that prioritises flexibility and personal choice. That is a welcome change for many retirees who want control and growth potential. Still, greater freedom is a double-edged sword. To make these reforms work in practice, the industry and policymakers must provide sensible defaults, better guidance and strong consumer protections. With the right support, savers can benefit from higher returns and more personalised retirement journeys — but without that safety net, some may choose badly and pay the price.