Pensions used to be a little more simple for the average British worker. They retired and received, generally, a lifetime annuity, which provided an income for life. The expectations were straightforward. 

But those with less average pension pots, who wanted to continue working or stay invested, the solutions before April 2015 were few and far between. There was exceptionally limited flexibility.

Pension freedom and choice has given people more flexibility over how they slice and dice their pension pots. 

Various government rules have allowed defined contribution pensioners to pass on their pots to their descendants, take as much of their money as they like as a lump sum, remain invested in a drawdown product or shop around for an annuity. 

True, pension freedoms has also seen some rather peculiar things done with the pension money. At one FTAdviser conference, someone said their client had requested her money in order to buy a sheep.

Woolly ideas aside, the theory is that, post-freedoms, people have the flexibility and choice they need as to how their pension pot is treated. 

However, as various contributors to this guide have stated, this freedom also comes with a caveat: use too much, too soon and not only might the client be left with a large tax bill, but also could run out of money early on in their retirement. One can also add to this investment and sequencing risk.

For proponents of secure income streams for life, preventing this sort of situation would mean clients should take out an annuity. But advocates of drawdown would say this means clients are not getting the full benefit of market investment earlier on in their lives, or the ability to decide when, where and how much they actually need to spend at certain life stages. 

Therefore, a blended solution – taking some element of the ‘income for life’ of an annuity, with the investment flexibility of drawdown – could be a good idea for some clients.

As Nigel Orange, technical manager at Canada Life, comments: “Adopting a blended strategy could be the answer: a good compromise with striking a balance between risk and reward, security and flexibility.” 

Contributors of content to this guide: Lorna Blyth, pension investment strategy manager for Royal London; Andrew Tully, pensions technical director for Retirement Advantage; Nigel Orange, technical manager for Canada Life; Kim Lerche-Thomsen, founder and chief executive of Primetime Retirement; Steven Cameron, pensions director at Aegon; Fiona Tait, technical director for Intelligent Pensions; a spokesman for LV=; William Burrows, retirement director for Better Retirement; Femi Folorunso, senior consultant at Mattioli Woods; the Financial Conduct Authority; and the Association of British Insurers.

Simoney Kyriakou is content plus editor for FTAdviser