The retirement planning manager for Skandia said a swift change to retirement income rules and a simplification of all the products was required in order for the government’s proposed pension reforms to work.
He said the streamlining was needed to replace the different ways of taking an income outlined in the Finance Act 2004, especially with the Budget changes to pensions creating a broad need for more advice.
He added that all the various options – such as lifetime annuities, short-term annuities, capped drawdown, flexible drawdown and scheme pensions – should be scrapped and replaced with three simple ones.
Mr Walker added: “We believe that the overly complex rules governing annuity and drawdown products need to be abolished. All that is necessary are sensible rules regarding how money is extracted from a defined contribution pension scheme.
“Following the Budget announcement, consumers are expecting it to be easier to access their pension savings. If product rules remain, their expectations will be frustrated by the restrictions on choice that will still exist.”
He added: “If we can simplify the options available to them, we are likely to see greater engagement with their retirement savings.”
Mr Walker’s suggested options for DC schemes:
■ A tax-free lump sum for the first 25 per cent of a withdrawal
■ The remaining 75 per cent of a withdrawal as a taxable lump sum
■ Applying funds to a retirement income product
Robin Sainty, chartered financial planner at Nurture Financial Planning in Norwich, said: “Simplification is not necessary and doesn’t always work, look at what happened with A-Day in 2006. One size doesn’t fit all and the options available mean all clients are catered for.”