The Labour Party has promised to keep the government’s pension reforms if it wins power in May, despite threatening to cut the amount that people can save tax-free into a pension each year.
Shadow secretary of state for work and pensions Rachel Reeves said: “Labour wants a better deal for savers, and we support reform and greater flexibility for people in retirement.
“We believe it’s right that people who save are given greater choice in using their carefully saved pension money. But we want the Government to go further to help people turn more of their hard-earned savings into a decent income in retirement.”
She said Labour would bring in additional protections to prevent savers from excessive fees. One of its policies is to lower the fees cap introduced by the government – currently set at 0.75 per cent – to 0.5 per cent by the end of the next Parliament.
She added that Labour had set out three tests to see whether the reforms worked: whether there is independent support for savers, whether those on middle and low incomes can get the private pension products that give them certainty in retirement, and whether they will result in extra costs to the state.
According to Ms Reeves, HM Treasury must also publish a fully costed implementation plan for the delivery of high-quality advice, including steps to combat the risk of mis-selling.
She said: “Labour is extremely concerned about the inadequate preparations by government ahead of the introduction of the new pension freedoms in April 2015. The government must act quickly to prevent pension changes descending into chaos in two months’ time, and ensure savers are able to access financial guidance ministers have promised.”
|Pensions task force|
The Labour Party has appointed a task force, chaired by Dr David Blake of the Cass Business School, to explore how savers can manage longevity risk, the role of Nest in helping savers get access to good quality retirement products and the support available to help savers make the right decisions. In considering alternatives, the task force has expressed interest in the collective pensions schemes in Canada and the Netherlands. It is expected to report in the summer.
Mark Hibbitt, director of Gloucestershire-based Sovereign Independent Financial Advisers, said: “I welcome the reforms, so I’m pleased they would be kept. I can see that a lower charge cap would be positive for investors but there is a danger for active fund managers. We just need to make sure that people with more complex needs can be tailored for outside the cap.”