Labour has failed in a fresh push to ensure everyone buying an annuity must speak to an independent annuity broker.
In an amendment to the Pension Schemes Bill, shadow pensions minister Gregg McClymont said no provider should be able to sell an annuity unless there is the express recommendation of an independent broker.
Labour first tabled a similar clause in the Pensions Act 2013 but it was rejected. Despite the new freedoms meaning savers can access their entire pension pots and guidance guarantee, Labour argues seeing an annuity broker is still necessary.
The amendment was pushed to a vote but was rejected by ten votes to five at House of Commons committee stage.
McClymont said: “Individuals might not exercise a choice through the new flexibilities that have been introduced, but will instead look to do something more similar to the current retirement income market.
“That is a roundabout way of saying that the Budget reforms and the guidance guarantees inserted into the Bill in the amendments do not explicitly solve the challenge of consumers defaulting back to their savings provider for an annuity.”
Pensions minister Steve Webb slammed the proposal as “backward-looking, restrictive and costly”.
He said: “There might be a compelling reason for people in that sort of scheme to stay in-house. Yet even if it is blindingly obvious that they want an annuity—perhaps an IFA has told them an annuity is best—they would still have to pay an independent annuity broker for permission to stay with the people they are with who might have a market-leading guaranteed annuity rate.
“The new clause is clumsy, backward looking, restrictive and costly. Those are just a few of the reasons why it should be rejected.”
Conservative MP Richard Graham said: “There will be times, of course, when protection is relevant, but to be so prescriptive and put the individual wish at the bottom of the pile is part of the overwhelming philosophy that the state knows best and the individual must come last, with the decisions imposed from the top down, whatever the cost or consequences.
“It is time for us all to realise that neither the man in Whitehall nor the politician knows best the correct solution for an individual’s financial planning. That is why I will certainly not support the new clause.”