concerns over a future unwinding of radical pension reforms were alleviated this afternoon as the opposition Labour Party did not oppose the Taxation of Pensions Bill during its second reading in the House of Commons, although several MPs criticised various elements of the legislation.
The debate was opened by financial secretary David Gauke, who confirmed the uncrystallised funds pension lump sums withdrawal option - which some have said makes a pension fund work like a bank account - while admitting it was “not perhaps the most elegant of names”.
He stated that the tax impact of the bill were “not particularly considerable” on public finances, to which shadow financial secretary Cathy Jamieson asked for clarification, particularly on suggestions it could lead to a £1.6bn tax windfall for the Treasury.
Mr Gauke responded that these claims were “exaggerated and highly unlikely”.
There had been fears that Labour may seek to unwind some proposals following complaints at the speed in which they are being implemented.
However, these fears appear to be abating. Earlier this month shadow pension minister Gregg McClymont pledged to “go with the grain” on annuity reform during a speech, while today Ms Jamieson the Labour Party would not oppose the bill.
She also rejected assertions that the party was ambivalent about the legislation, insisting the opposition’s position has been consistent.
Ms Jamieson stated that Labour supported the increased flexibility and choice for pension savers, but argued it would be remiss “if we didn’t identify and highlight the potential problems and pitfalls”.
She particularly attacked the lack of preparation and consultation from the chancellor in springing the reforms on the industry in the Budget.
“The intention was clearly to make a big splash, which he did by causing turmoil in the industry. The Labour Party is serious about pension reform. However, unlike this government, we are also serious about getting about it right.”
Ms Jamieson paid particular attention to the guidance guarantee that will accompany next April’s pension freedoms, noting that the Financial Conduct Authority’s vision of “tailored, personalised” guidance, sounds very different from that set out by pensions minister Steve Webb.
“For him, guidance is merely a portal to advice; advice that people will have to pay for,” she stated.
Ms Jamieson also criticised the potential cost of the plans, raising concerns about insufficient government funding and the levels of levy put upon the pensions industry, which is still under consultation.
Crispin Blunt, Conservative MP for Reigate, was supportive of the bill, but sticking up for constituency members Partnership, Just Retirement, Legal and General and Fidelity he said that the speed of the reforms have “caught the market by surprise”.
He added that the specialist annuity firms in Reigate were “weathering the sudden strategic change in their operating environment”, but stressed the urgent need for certainty about the legal framework in which they will operate to enable them to bring new products to market.
peter.walker@ft.com
