Pensions minister Steve Webb has rejected concerns savers will take their entire pension pot as cash from age 55 following a radical liberalisation of UK tax rules.
Reforms announced by Chancellor George Osborne during the Budget last month mean that, from April next year, anyone aged 55 or over will be able to take up to 100 per cent of their fund as cash.
While the changes have been broadly welcomed by the advice sector, some commentators have warned savers risk being left worse off in retirement if they are handed greater freedom over how they spend their savings.
Speaking to Money Marketing, Webb says: “The risk of people blowing the lot as a result of these reforms is greatly overstated. I do not buy this notion that people will deliberately do this for the joy of living on housing benefit.
“An earlier Government would have been much more wary than we could about doing this because of the single-tier state pension.
“Simple arithmetic suggests the drawdown rules can be relaxed with a different state pension system.”
Webb also warns providers against devising a “cunning ruse” to work around the 0.75 per cent auto-enrolment default fund charge cap.
He says: “I do not quite divide the industry into good guys and bad guys but there is clearly a spectrum. There are forward looking companies who offer good value without anybody making them and there are others who have exploited consumers’ lack of awareness and complexity.
“When we draw up the regulations on the detail of the charge cap we will have to carefully define the default fund but if any provider tries to get around the charge cap by some cunning ruse, that is not in the spirit of what we are trying to do, we will be on them like a ton of bricks.”
The full interview with Steve Webb will be published in next week’s Money Marketing