Pensions freedom costs retirees £2bn as shift to ISAs continues - LCP

Lost returns

clock • 3 min read

Retirement savers who encash their pots using pensions freedom have missed out on potential collective investment returns totaling £2bn, LCP analysis suggested.

Pensions freedoms, introduced in 2015, allows over 55s to access their retirement funds. LCP said a trend had emerged where people encash their pension pots only to shift the money into cash ISAs or other low interest accounts meaning they lose out on potential investment returns. LCP suggested the problem could be tackled by allowing people aged 55 and over to access their tax-free lump sum while leaving the rest of the fund invested. LCP looked at official figures from the Financial Conduct Authority (FCA), which showed that, between April 2015 and March 2020, a little over 1.7m peo...

To continue reading this article...

Join Professional Adviser for free

  • Unlimited access to real-time news, industry insights and market intelligence
  • Stay ahead of the curve with spotlights on emerging trends and technologies
  • Receive breaking news stories straight to your inbox in the daily newsletters
  • Make smart business decisions with the latest developments in regulation, investing retirement and protection
  • Members-only access to the editor’s weekly Friday commentary
  • Be the first to hear about our events and awards programmes

Join

 

Already a Professional Adviser member?

Login

More on Pensions

Budget 26: Government to get rid of two-year tax rule on lump sum death benefits

Budget 26: Government to get rid of two-year tax rule on lump sum death benefits

Changes will also be made to how tax due on excess lump sum death benefits is collected

Jonathan Stapleton
clock 28 October 2026 • 1 min read
Budget 26: State pensioners to be shielded from income tax

Budget 26: State pensioners to be shielded from income tax

State pension expected to rise to £13,036

Sophia Panayi
clock 28 October 2026 • 2 min read
Budget Media Watch: Healey to raise tax-free allowance for low-income state pensioners

Budget Media Watch: Healey to raise tax-free allowance for low-income state pensioners

Not expected to tinker with tax-free lump sum

Jen Frost
clock 26 October 2026 • 2 min read