Pensions minister Ros Altmann has pushed back against plans to allow savers to choose their pension provider when they are automatically enrolled by an employer.
Money Marketing revealed a Government policy unit was exploring the proposal last week, just six months after Altmann put plans to implement pot follows member on the back-burner.
The plans would aim to dramatic-ally reduce the number of small pots generated by auto enrolment, but Baroness Altmann has now made it clear she would fight the changes while auto enrolment is still being implemented.
Speaking to Money Marketing, Altmann says: “We really have to do everything we can to avoid upsetting the apple cart.
“It’s important the employers don’t have extra burdens put onto them at the same time as they are going to set up pensions schemes.
“It is challenging for many of them but they are coping with it quite well. It would be extremely unwise to add another layer of complex requirements at the same time as you are putting these burdens on employers.”
The Government is scheduled to embark on a review of the effectiveness of auto-enrolment from next year, following the scheme’s rollout to all employers.
The pensions minister has also played down the numbers of people expected to venture into the secondary annuity market following its launch next year.
“It is challenging for many employers but they are coping well. To add another complex layer would be unwise”
A consultation paper published by HM Revenue & Customs on the implementation of the market last week suggested 300,000 people would sell annuities over the next two years.
However, Altmann expects demand to be limited. She says: “This was always going to be a niche market, but it’s absolutely right we help people to have a chance, if they really want to, once they’ve understood all the costs and charges and risks associated with it, that they get to undo a deal they may never have wanted to do in the first place.
“We don’t know how many people are unhappy with what they have got. We have had lots of letters, but in terms of the numbers who have bought annuities that’s a small number. And we don’t know what companies will bid or what people’s other circumstances are.
“Previously, drawdown was commonly on offer if a saver had more than £50,000 or £100,000. So there will be people who have been forced to buy a very small lifetime income with that, but who draw very little benefit from it.”
The Government documents also restate a commitment to an advice requirement for savers seeking to sell annuities above a certain threshold.
The exact advice requirement threshold has yet to be set out but Altmann says this could be calculated either as a simple total figure or by looking at the proportion of total retirement income that would be affected.
She says: “The thing we have to remember is that if this is a totally irrelevant sum in the grand scheme of all your wealth decisions, you might be less worried. However, if it is a more important element, perhaps we need to encourage people to find another way of looking at it.”
Altmann’s comments come days after she said a move to bring the tax treatment of pensions in line with Isas would be a “disaster”.
Speaking at an Association of British Insurers event in London last week, Altmann reiterated her long-held opposition to a taxed-exempt-exempt system, stating reform “would destroy pensions as we know them”.