Lord Turner: Pensions freedom was not needed

Lord Turner: Pensions freedom was not needed

Lord Adair Turner, the former chairman of the FSA and the author of the eponymous 2004 pensions report, has questioned the wisdom of pensions freedoms in an interview with Money Managemen t.

The UK pensions landscape has undergone a number of changes recently, with the retirement freedoms following on from the introduction of auto-enrolment. But while the industry is still coming to terms with these changes, Lord Turner said, “I have some doubts about pensions freedom.”

In an exclusive interview for Money Management’s November issue, Lord Turner acknowledged his part as an architect of the current landscape. “Obviously it became possible to consider it [freedoms] because of the coalition government’s reforms, which built upon the reforms I proposed,” he said, before adding, “I am wary that what we may get is a lot of people taking pension freedom and blowing it all.”

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He added,“Yes they will have this new higher state pension but it still is no more than to keep you out of poverty. It is not going to be enough.”

Lord Turner warned that people need to use the freedoms very carefully underlining that he did not see the need for their introduction at this stage. “I was surprised by it and I don’t think we needed to do it. I think we had already taken measures to delay the age at which annuitising was required and we could have done it by encouraging more drawdown products, making people aware of the freedoms they had to delay annuitisation. I think getting rid of annuitisation entirely as against delaying it may be a step too far.”

He said he believed annuities had got a bad name purely because people were taking them too early in life.

However, he applauded the changes brought by auto-enrolment and said it had worked beyond everybody’s wildest dreams, “The percentage staying enrolled has been very very high. I think it is one of the biggest examples of the actual application of behavioural economics in the world.”

On the broader economy, Lord Turner said the UK was growing and creating jobs but that it lacks a model delivering real wage growth to everybody in the society. He warned that deflation still remains a global problem.

“There is still unresolved debt overhang from the huge increase in leverage that occurred across the developed economies before 2008. All we have done is shift the debt from the private to the public sector. I don’t think we are going to be able to get out of that without either monetising debt or writing off debt,” he warned.