Timms: pension freedom issues should have been fixed at the time

Timms: pension freedom issues should have been fixed at the time

While pension freedoms have been a good thing for savers there remain issues which should have been sorted at the time, such as the need to ensure people took guidance and advice, Stephen Timms has said.

Appearing on the FTAdviser podcast this week, Timms, chairman of the work and pensions committee, said the issue to get people to take guidance or advice before accessing their pot was well understood and talked about back when freedoms were introduced but it was not fixed.

He said this must be addressed now otherwise there will still be "thousands of thousands of people not getting the income in retirement that they should get”.

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The pension freedoms legislation, which came into force from April 2015, allowed savers to flexibly access their defined contribution pension from the age of 55 and use the funds for a wider range of options, including cash withdrawal, retirement income products or a combination of the two.

Last month, the committee published a report looking into pension freedoms and recommended a number of areas where savers need more support with their pensions.

For example, its recommendations included increasing the uptake of guidance for pension wise, splitting out tax free cash access and how to increase the take up of advice in general.

In the podcast, Timms said there should be a target for the number of people getting guidance or advice and it should be at least 60 per cent.

But currently the the number of people taking Pension Wise appointments is very low at 14 per cent 

Timms said the government should look to auto-enrol people into guidance sessions to boat this.

He said: “We would like them to try out automatically giving people a pension wise appointment when they get close to the age when they can access their pension, maybe age 50.”

He added: “There will certainly be people who wouldn't need an appointment and would not want to attend it. One of the issues would have to be if you're given an appointment, and you just don't show up. Potentially that could be very wasteful and inefficient so that's why we're suggesting in our report, this should be trial. Let's try it out. Let's see what happens.”

To listen to the full podcast click play on the player above. FTAdviser's podcasts are also available on Apple Podcasts, Spotify, Stitcher and Acast.