During the second reading of the Pensions Bill Work and Pensions Secretary John Hutton said:
“During the Bill’s passage through Parliament, we intend to take powers to enable us to remove the complex rules governing rights accrued in contracted-out defined contribution schemes, following the outcome of the review of the open market option for annuities that we expect to be completed by the end of the year. The removal of those rules will simplify the management of rights for both schemes and members, reducing costs to schemes and supporting our aim of simplifying pensions regulation.”
The announcement comes despite concerns that the Government’s annuities markets report accompanying the Pre-Budget indicated plans to kick earlier DWP commitments to bring protected rights into line with voluntary savings into the long grass.
Standard Life says up to £4bn a year has flowed into contracted out personal pensions since 1988, leading to a conservative market estimate of £75bn-£100bn total protected rights savings.
Scottish Widows head of pensions development Ian Naismith says:
“I always thought that people were reading too much into the pre-Budget statement and introducing an element of conspiracy theory that never existed.”
The DWP will review whether protected rights should be available in a Sipp once Sipp regulation beds in.
Naismith believes it is possible the DWP will remove other restrictions fairly soon but leave the Sipp ones in place until it sees how regulation works out.