Aegon has come out in opposition to the government’s distinction between ‘flexi-access’ and ‘uncrystallised funds pension lump sum’ as options for savers to withdraw their pension funds, deeming the latter “unnecessary and unhelpful”.
In July HM Revenue and Customs unveiled in its draft guidance three ways for savers to access their pension fund.
Options include placing a fund into drawdown under a new type of fund known as ‘flexi-access drawdown’, from which consumers can withdraw any amount over whatever period they choose. Alteratively savers could provide an income by using their pot, or a portion of it, to purchase a lifetime annuity.
Alongside these familiar options, HMRC unveiled a third option that will allow savers to take lump sums from their pension after the age of 55, without crystallising the pot, called ‘uncrystallised funds pension lump sum’.
In response to the Financial Conduct Authority’s consultation paper on the guidance guarantee, Steven Cameron, regulatory strategy director at Aegon, stated that the more complex the new options, the greater is the challenge of helping customers make the right choice.
He said: “This is why we believe advancing both ‘flexi-access’ and ‘uncrystallised funds pension lump sum’ is unnecessary and unhelpful and it would simpler to advance just ‘flexi-access’.”
“We have concerns over the ability of the guidance guarantee to cope with explaining let alone differentiating between the two options, and the different tax treatments surrounding them.”
Mr Cameron also pointed out that people need to engage with their pension well in advance of when they start considering drawing income.
“The guidance guarantee comes too late in the process to help with this,” he said, adding “advisers have a major role to play in engaging customers and for those without access to an adviser, digital guidance services offer huge potential.”
Aegon suggested the development of a standard digital ‘app’ that would set out objectively the way in which an individual’s options would be presented based on the information they provide on their circumstances.
The firm also responded by stating that due to the wide reach the guidance guarantee is expected to have, fees should be funded from general taxation; “if not, the scope must be kept focused to avoid an open-ended funding obligation on the industry.”
