Pensions  

Too much confusion: ex-shadow pensions minister

Too much confusion: ex-shadow pensions minister

The former shadow minister for pensions has branded the government’s pensions system “bewildering”.

Former Labour MP Gregg McClymont said there was widespread confusion about how much to save and where to save it.

Questions over what would be the tax implications of such decisions, while important, were not crucial to an individual’s decision-making, he said, claiming that people mostly wanted to know where they should save for the best possible outcome in retirement.

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He said: “As a nation we are bewildered by the pensions system with people not knowing how much to save or even where to save it.”

Mr McClymont highlighted the latest government consultation on tax relief, which closed on 30 September, but added: “It is unclear that tax relief changes are the key to encouraging more saving.

“What is clear is the importance of the employers’ role: if companies contribute to an individual’s pension it incentivises that person to save more. That makes it critical that we continue to build a workplace pensions system for all.”

In September, Aberdeen Asset Management commissioned pollster YouGov to gauge the extent of confusion over the UK pension and savings system.

Out of 2104 adults, 1,148 of whom were workers aged 18-64, 65 per cent said it was difficult to understand where they should save. Some 57 per cent said it was difficult to understand when and how they could get the income in retirement that they would need.

Only 22 per cent said they did not have any form of savings.

Adviser view

David Smith, director of financial planning for national advisory firm Tilney Bestinvest, said: “Nearly six months on from pension freedoms coming into effect, major providers of non-advised drawdown contracts that can be opened direct by clients, without the need for financial advice, have seen sales surge.

“Surely this must be of concern? After all, do most of the general public truly appreciate and understand the risks caused by longevity, inflation and investment risk, to name just three? Do they really understand income tax situation and how to mitigate taxes? Clearly, many do not.”