Pensions  

Will Taxation of Pensions Bill be fit for purpose?: Minister

Cathy Jamieson, shadow financial secretary to the Treasury, has raised doubts about the likely outcomes of the pensions tax bill currently under parliamentary discussion.

Speaking at the House of Commons Taxation of Pensions Bill committee, she said: “Watchwords for the bill have been ‘freedom’ and ‘choice’, and in principle everyone welcomes this, but the question is the extent to which that freedom and choice is an end in itself.”

She acknowledged that the pension reforms would appear to constitute a welcome devolution of responsibility to the individual, but asked whether in fact it was devolution or inverse correlation.

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Ms Jamieson asked what the government hoped to achieve with the bill, saying: “Does it believe that this bill will provide people with greater security in retirement, greater product innovation and outcomes for customers?”

She added that the effectiveness of the bill would not be judged on intended outcomes but what it will achieve in practice.

Earlier this year, Ms Jamieson had raised concerns in the House of Commons about how the guidance proposed would work in practice, particularly with regard to tax implications.

She questioned whether enough had been done to ascertain how people would access their pensions, especially those with small pension pots, and on what work had been done to avoid unintended consequences if people were to draw down pensions.

Earlier this month, David Gauke, financial secretary to the Treasury, told the same committee he was not expecting a “sudden surge” in people expecting financial advice in April because of pension changes.

Background

The government has announced that the changes required for the Budget’s pension freedoms would be made in an autumn Taxation of Pensions Bill. The bill is currently in committee stage in the House of Commons.

The committee is expected to report today.

Adviser view

James Garman, financial planner at Nottingham-based Retirement Specialist, said: “The changes have been unusually welcome by all – the consumer and the industry. I think people with medium to large pots will manage it sensibly and wisely. People will not also allow it to be taken in tax, and will use tax allowances available.

“The guidance guarantee might help those with simple affairs but for those with complex affairs it will not go far enough because it cannot provide advice. Hence the adviser has a big role.”