Labour sets out plans to toughen up pension freedoms

Labour-Supporters-Conference-2012-700x450.jpg

A long-awaited Labour report into pension freedoms has proposed a raft of new measures to protect consumers, including new “safe harbour” decumulation products.

The report, commissioned by the shadow work and pensions secretary Rachel Reeves in 2014, will form the basis of Labour’s pension policy.

Written by Cass Business School’s Professor David Blake, it targets savers’ need to receive lifelong income from their pension pots.

Blake calls for the development of a range of new safe harbour products, which advisers will be able to recommend without liability.

The products would be accredited by the FCA for accessibility, inflation protection and longevity insurance, and will have to meet common standards on transparency and value for money.

Blake says these products will be designed as “quasi-defaults” for savers who do not wish, or are unable to, make a decision on their retirement income, and could be provided either by private firms, or by an organisation like Nest.

The report also calls for all products which do not include longevity insurance to be classified as “high-risk” by the FCA.

It wants a new charge cap to include advice and platform charges, while all categories of advice and guidance should be rebranded as either “personal recommendations” or “financial support” to help with customer understanding.

The report also reiterates call for a permanent commission to report to Parliament, with a remit to look at pensions, savings and long-term care.

Shadow work and pensions secretary Owen Smith says: “This expert review asks serious questions about the sustainability of our current pensions system, and the increased risks being borne by individuals after recent Government reforms.

“The relative popularity of the pension freedoms reforms should not obscure those questions and Professor Blake is right to challenge Government and employers to play their part in mitigating the danger that pensioners who have saved all their lives might still have insufficient funds to last them through retirement.”

Smith adds: “We will use the strong foundations laid down to build a Labour pensions policy that will prepare Britain for the long term and protect the interests of workers, pensioners and wider society.”