The industry is still “seeking the most basic clarity” around the government’s radical package of at-retirement reform, including what the guidance guarantee will look like and how it will be implemented, according to the shadow pensions minister.
Speaking at the National Association of Pension Funds Annual Conference, Labour minister Gregg McClymont (pictured) said time was running out for pensions providers and professionals to implement the measures before the deadline of April next year.
He also said the industry did not have any assurance that take-up of the guidance guarantee would be high enough to drive these reforms.
From April next year defined contribution (DC) pension scheme members will be able to take as much of their pension pot as they wish in cash from the age of 55 subject to a marginal rate of tax. The move effectively ends compulsory annuitisation and gives savers more freedom to enter into income drawdown throughout retirement. As part of this, it also announced the introduction of a “guidance guarantee” stating everyone who retires with a DC pension will be offered “free and impartial face-to-face guidance” on their choices at the point of retirement.
McClymont told delegates even though he welcomed flexibility for savers and the annuity system was “broken” and needed reform, there was a “backlash” among professionals and “dangers the government must address”.
He said: “A system of checks and balances must be put in place so we know how to proceed. What is it [guidance guarantee] going to look like? The government has not addressed how drawdown will apply in these areas. How does that impact on the pensions system more widely?”
However, McClymont did not go as far as saying the guidance should be mandatory, adding that to make it so would be “complicated”.
He said the Labour party would not let the government get away with making statements it could not back up in practice, referencing other changes it has proposed to enforce a charge cap and closer scrutiny of transaction costs.
“It must deliver in substance, not just in name,” he added.
Comments