Personal Pension  

Industry urged to hammer out pension ‘details’

Financial secretary to the Treasury David Gauke has urged the industry to engage with the government to design the details of its reforms.

Damian Fantato

Chief Reporter

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Speaking to the Westminster and City annuities and drawdown conference, he compared the previous pensions regime to the menu of a Soviet restaurant, and said it was up to the industry to use the new freedoms to create a wide range of new products.

Mr Gauke said: “The industry knows its customers best. That allows you to play an important role in designing the detail of a system that really works.

“While we, in consultation with industry, have designed the overall tax framework, we are aware that there is a lot more that sits beneath that, in terms of systems, in terms of products, in terms of how the new flexibilities actually work from the perspective of the people using them. So we have designed these changes to allow you much more freedom to create new products and processes that fit with the demands of customers and the changing nature of retirement.”

Mr Gauke told the conference at The London Marriott in Canary Wharf that both the government and the industry have been “scratching their head” for years about people’s lack of engagement with retirement.

“We have geared these reforms, alongside the guidance guarantee allowing people access to impartial guidance, to re-engage people with their pensions and transform the culture of savings.”

The Finance Act of 1921 put in place the basis of the current policy towards the use of tax-relieved pension savings by introducing the mandatory annuitisation of pension funds.

But shadow pensions minister Gregg McClymont said a cap on pensions charges should be considered to prevent people’s savings being eaten up by fees.

He said: “Labour welcomed the new pension flexibilities announced in the Budget but we are concerned that the Government has not thought through the risks of rip-off charges being taken from the savings of hardworking people.

“I welcome the announcement by David Blake’s independent review of retirement income that they are studying the case for a new charge cap on pension products offered to savers by their pension provider to replace annuities.”

Key Figures

From April, people aged 55 or over will be given the freedom to withdraw their pension savings.

The government is also putting together a new legal framework for pensions which provides for three categories of schemes.

From April 2016, a new single-tier flat-rate state pension is being introduced at around £148.40 a week.

Source: Treasury/DWP

Adviser view

Richard Gunn, managing director of Hertfordshire-based BP Sanders, said: “It is going to be a disaster. All the reforms are ill-thought-through. Some people will potentially raid their pension funds and there will be nothing left.”