The pensions industry is ready for the challenge of innovating and creating new, flexible products that better suit individuals needs, the chancellor has confirmed.
In a written ministerial statement accompanying this week’s government response to consultation from the Treasury, Freedom and Choice in Pensions, George Osborne MP said those who wanted the security of an annuity could have that, while others had the flexibility to do what they wanted with their pension pots.
Although there is flexibility, the Coalition Government acknowledged there may be exceptions to the rules, and that where people did want to transfer, there had to be “essential safeguards”.
In his statement, he said: “These reforms create more choices for individuals and the government wants people to be equipped and ready to make informed decisions.”
He said the right to free and impartial guidance would “empower” them and it would be delivered by “independent organisations, with no actual or potential conflict of interest”.
He confirmed that delivery partners would include the Money Advice Service and the Pensions Advisory Service, and the government would continue to discuss ways that organisations such as Citizens Advice and Age UK could work to help deliver this.
Also in his speech, Mr Osborne said the government would allow transfers from private sector defined benefit to defined contribution schemes, excluding pensions already in payment, subject to additional and important safeguards.
The government he said continued to believe that transfers from unfunded public service defined benefit schemes should be banned, in order to protect the Exchequer and taxpayers.
Mr Osborne said the Treasury had decided to allow some transfers from defined benefit to defined contribution schemes as long as advice was included.
Adviser comment
David Smith, financial planning specialist for London-based Bestinvest, said: “While it was initially suggested this would be facilitated through the pensions providers themselves, today the Treasury has announced that what will be made available is ‘guidance’, not advice, and it will be provided by a range of Quangos that are independent of pension providers.
“While this is a clearly a step in the right direction, as the public are likely to be sceptical as to the impartiality of a pension provider, it is important to also recognise this has real limitations. Selecting a decent retirement solution, whether a portfolio of funds or an annuity will still require expert help.”
