Altmann admits savers ‘bewildered’ by pension changes

Speaking to FTAdviser, Baroness Altmann said the latest changes to the pension market - including giving people unfettered access to their savings and the introduction of the Lifetime Isa - is the government trying to ensure it is fit for the 21st century.

But she accepted the reforms hit a sector still dealing with years of tinkering that have left people baffled and bewildered about their future finances.

“That’s why we are in the middle of a pensions revolution, which is seeing major radical overhaul of both state and private pensions, following years of tinkering and piecemeal changes that have left people baffled and bewildered about their future finances.”

Baroness Altmann said these major policy changes take time to implement and lead to uncertainty while they are going through.

“However, it is important that private pension saving does not become too confusing for people to engage with.

“Constantly changing the rules and goalposts is not helpful,” she said, suggesting the pension freedoms can form the basis for building good private pensions once they are properly understood.”

But Martin Tilley, director of technical services at Dentons Pension Management, claimed savers do not trust the government’s motives for continually changing the pensions system, and the introduction of the Lifetime Isa could in fact discourage people from saving.

He suggested the government is looking to score political points and raise revenue for HM Treasury, saying such aims are not associated with incentivising people to save.

Prior to the Budget, the Treasury suggested now was not the right time to be making radical pension reform and yet they have introduced the Lifetime Isa,” he said.

“The industry is poised for announcements in subsequent Budgets that will enhance the Isa route and reduce the current pension tax relief system,” he said.

“So again the electorate is left without certainty of a long-term stable solution for retirement savings.”

Instead of trying to balance the books before 2020, Mr Tilley said the government needs to stop altering the pensions regime, which can be expensive for the industry, an expense which ultimately gets passed on to the consumer.

Mr Tilley said the Lifetime Isa has been seen by many as a “halfway house” between the current pensions regime and the proposed move toward the so-called ‘Pensions Isa’.”

“Constantly changing the rules and goalposts is not helpful.” Ros Altmann

Baroness Altmann agreed pensions policy needs to create a stable long-term framework and should not be used for political purposes that focus too much on short term factors.

Pension providers repeated previous calls for a period of calm in pension legislation.

Fiona Tait, pensions specialist at Royal London, said pensions are too complicated, compounded by continual changes made by successive governments.

A period of stability on pension rules would be “highly desirable” to give people time to understand how the system works and begin to save in the most efficient way possible.

Ms Tait also said this would help product providers that have had to implement large-scale system changes in the last few years, which has subsequently impacted on their profits.

This was echoed by Jamie Jenkins, head of pensions strategy at Standard Life, who said constant change can be costly and damaging.

“But if such changes follow a singular policy direction, then incremental change allows us to constantly improve things for consumers as the world around us changes.”

However Adrian Boulding, policy strategy director at the Tax Incentivised Savings Association, said the government is taking pensions through a period of “creative destruction”, moving away from the “tightly defined rule-set” of traditional pensions.

He said this traditional approach is being broken down and replaced with a more holistic view of long-term savings, in order to fit with modern employment patterns and the way consumers organise their lives today.

katherine.denham@ft.com