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Govt urged to hike pensions access age

An influential committee of MPs is calling on the Government to dramatically increase the age at which people can access the new pension freedoms to reduce the risk of savers running out of money in retirement.

A Work and Pensions select committee report on the progress of automatic enrolment and the ‘Freedom and choice in pensions’ reforms, published today, calls on the next government to establish an independent pensions commission to:

  • review auto-enrolment implementation to date,
  • advise on necessary changes and adjustments to auto-enrolment,
  • consider the implications of the pension freedoms changes,
  • advise government on consequent amendments to existing pensions legislation, and on the development of future pension policy.

The committee wants the new commission to be established by July, two months after the general election.

It says: “The new commission should be similar in format to the 2005-06 Pensions (Turner) Commission, with a chair and two or three members only, but it should involve the widest range of stakeholders in its deliberations, including the pensions industry, employers, employees and their representatives, pensions experts and consumer representatives.

“It should coordinate its work with the Government’s planned independently-led review of state pension age.”

Committee chair Dame Anne Begg says: “The scale and pace of recent changes in pensions policy have completely changed the retirement saving landscape. It is necessary to draw breath and review the extent of the changes and their implications.

“A new independent pension commission would be able to identify any emerging risks, and explore with stakeholders how these can best be addressed. The Turner Commission brought political consensus, full involvement of stakeholders, and detailed consideration of the wider impacts of major pensions policy changes. The successful introduction of auto-enrolment is a product of this.

“The current reforms have not always benefited from the same careful approach. A new commission is now needed to provide coherence in pensions policy and to build public confidence and long-term stability in the system.”

The pension freedoms coming into force in April will allow savers to access their pot from age 55. Under current plans this will increase to 57 in 2028, when the state pension age is due to rise to 67, but Begg argues the access age should increase more rapidly.

She says: “Allowing people to take advantage of the new pension flexibilities 10 years before they get their state pension could create unrealistic expectations about the age at which they can afford to stop working.

“Our view is that, given the significant tax relief provided for pensions, increased longevity, and the importance of ensuring that people do not underestimate the income they need in retirement, the age at which people should be able to access their pension pots should be changed to five years before the state pension age, except where there are ill health grounds. This is one of the key issues the proposed new commission should look at.”

If a commission is created it should review the auto-enrolment earnings trigger, currently set in line with the income tax threshold, the committee says. In addition, the committee wants policymakers to consider ways of supporting the low paid and self-employed, who are currently excluded from the reforms.

The committee also urges the next government to review high charges and poor governance in legacy schemes “as a priority”.

On Pension Wise, the Government’s retirement guidance service, the committee says: “It is questionable how meaningful a 45-minute guidance session can be, given the low level of savers’ understanding of retirement saving and financial products.

“Savers who choose not to use Pension Wise also need to be protected, including from the pensions industry itself.”

The report goes on to criticise the Government for taking “too long” to firm up plans for introducing automatic transfers for small pension pots, due to be implemented in 2016. Finally, it repeats calls for the FCA and The Pensions Regulator to be merged into a single body policing both trust and contract-based schemes.

Begg adds: “The new pension flexibilities give savers the freedom to use their money in the way they choose and have the potential to make retirement saving really attractive. But savers need to be properly protected from being ripped off in frauds or scams, or suffering financial loss from making the wrong decision about how to use their pension pots. The pensions industry has not always done enough in the past to help savers make the right decisions.

“What savers really need is a strong, single regulator to act in their interests. We are not convinced that the FCA is sufficiently focused on pensions. The comment made in evidence to us that it can’t “stop fools acting like fools” does not inspire confidence in the FCA’s willingness to be proactive in protecting savers.

“The Government is coming round to our way of thinking about the need for a single regulator. We believe that the big shift to the new pension flexibilities in April means that it is now time to make this change, which we originally recommended back in 2013.”



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Guide: how to… communicate with your pension members

Effective communication of your pension scheme is a large part of getting auto-enrolment right. Delivering the same message to all employees is not necessarily the way to go. To assist you with the communication of your pension scheme, we have provided some key areas to think about, such as:

  • What to consider when segmenting your workforce
  • How to communicate to pension scheme members at the right time in their member lifecycle
  • What topics you should be discussing with your pension members
  • The new pension freedoms and the importance of communicating them


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There are 4 comments at the moment, we would love to hear your opinion too.

  1. Elswewhere the FCA is quoted as having said that it cannot stop fools acting like fools. I quite agree. Are these MP’s suggesting that a separate pensions regulator would be able to? How? After all, it [the FCA] didn’t devise these new unfettered access provisions. It’s just trying to control a Pandora’s box situation and can hardly forbid people from doing with their pension funds what the law now says they can.

    What these do-goody-good MP’s ought to be calling for is an annual withdrawals cap (for which my suggestion would be 7½%).

  2. Blimey – recommending changes to changes before the changes have changed.

  3. Picking up on Julian’s comment -: “FCA is quoted as having said that it cannot stop fools acting like fools”.

    Which I agree with, however (yes there is always an however), I believe the regulator puts far to little attention or industry protection into this, as it, and the client, have the FOS and the FSCS to pat them on the back and make all their problems go away if they do act foolish ?

    You do have to wonder sometimes; what really is the risk, from a fools (and indeed the FCA’s) perspective ? as most only wake up after they have lost money, then complain and to a large degree get their money back, which again the good and savvy pay for !

    We really do work in a industry that is upside down, inside out and without reason, just how far does this rabbit hole go ?

  4. Financial Planning is becoming more a matter of guesswork than PLANNING anything.

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