Labour Shadow pensions minister Gregg McClymont says adequate provision of independent financial advice is vital for ordinary savers to understand the complex pensions landscape.
Many in the industry have raised concerns about the RDR’s potential to reduce the number of IFAs. Last November, FSA chief executive Hector Sants told the Treasury select committee that losing up to a fifth of advisers as a result of the RDR would be “acceptable”, although the regulator recently published statistics claiming that 91 per cent of advisers expect to reach QCF level four by 2013.
In an interview with Money Marketing, McClymont says: “Clarity is a big issue in pensions, as is people understanding the products they buy. We have to becareful about anything which reduces the quality and availability of advice. IFAs are a large part of that advice market, so it is a big concern.”
Elected to the Labour safe seat of Cumbernauld, Kilsyth and Kirkintilloch at the 2010 election, McClymont was made Shadow pensions minister in Ed Miliband’s October reshuffle.
An ex-speechwriter for Labour Home Secretary John Reid, McClymont has relatively little political or pension experience, having lectured on history at Oxford University before the election.
McClymont says top of his list as Shadow pensions minister is increasing the number of people saving into pensions as he was struck by the fact that 42 per cent of people are not saving for retirement.
He says auto-enrolment is one way of improving that, as is making pensions saving more attractive to young people. The Government’s housing strategy, released last week, was expected to contain proposals to allow access to pension pots to help fund a deposit for a house. There were no such proposals in the final strategy and the Treasury has ruled out early access to pension pots but McClymont says there is a strong case for allowing it.
He says: “The industry tells me the biggest obstacle to young people saving for a pension is the fact that they are saving for a house deposit. Most young people do not have the money to do both, so there is a big case for allowing that.”
The Department for Work and Pensions has put together a working group to develop a code of practice for the use of enhanced transfer values exercises. McClymont says this is a step in the right direction but insists that any code must have teeth. He says: “I am not convinced that anyone but a small group of people with actuarial experience can make sense of these schemes and make a balanced judgement. A code would help but it must have teeth and possibly even sanctions if the code is broken.”
Refusing to single out any specific firms, McClymont says pension fees are too high on the whole and transparency is lacking.
He says: “There will be different charges from different providers based on the quality of the product. If the costs and charges are not understood, it is hard to tell what is a quality product and what is not.”
McClymont is firmly against the Government’s delay to the timetable for auto-enrolment but says lightening the burden for small businesses is important.
Employers will have to auto-enrol workers into a pension as they become eligible but McClymont says allowing firms instead to check once a year who has become eligible is “a very sensible idea”.
He says: “Anything which helps small businesses do their jobs more effectively without unnecessary burdens is to be welcomed.”