The Government has “not thought at all” about how drawdown will work once it becomes the dominant form of retirement income, warns the Labour party’s pensions spokesperson.
Shadow pensions minister Gregg McClymont says one of his biggest fears around the Budget reforms is that the Government has not said how it will regulate drawdown.
Speaking at the NAPF conference in Liverpool yesterday, McClymont said: “We are going from annuitisation to a much more flexible drawing down of pensions savings. In terms of pension schemes, an area the Government has not got to at all yet is how drawdown will apply there.
“As drawdown emerges as the dominant form of decumulation from pension schemes, I worry that’s something that has not been thought about at all.”
McClymont tried to allay fears that Labour is planning to reverse the Budget reforms if it wins the general election next year.
He said the party needed to “work with the grain of the reforms”, adding that “the last thing that’s needed in the pensions landscape is yet another up-turning”.
He also suggested parts of pensions policy should be removed from politicians’ power.
McClymont said: “Over the last 4 years I’ve become sympathetic that in some areas of pensions policy there’s an argument to take it out of the political fire. One of the things that concerned me about the Budget changes is not the substance of them but the way they proceeded.”
There have long been calls from some corners of the pensions industry to take aspects of long-term pensions decision-making out of the hands of politicians. Auto-enrolment master-trust The People’s Pension has previously lobbied for an independent body akin to the Office for Budget Responsibility to be established for the pensions industry.
The major parties unveiled proposals to reconfigure tax relief on pension contribution during the recent conference season. McClymont said whatever changes are made need to be permanent.
He said: “If you’re in Government and you see the decile distribution of tax relief it always seems tempting to cut that relief. But if there’s to be further changes from any party then I think it would be to the great benefit of everyone if they were changes that would be permanent. ”