Osborne announced a fundamental overhaul of pension tax rules in his Budget speech last week. The changes will mean anybody who is aged 55 or over will be able to take their entire pension pot as cash from April next year.
L&G pensions strategy director Adrian Boulding says there have already been several attempts by Government to abolish the need to buy an annuity.
He says: “Before the Budget nobody had to buy an annuity but the regulatory bias in the system shepherded the vast majority of people into annuity purchase.
“We will only see a change in customer behaviour if we get a change in the the noises coming out of Canary Wharf.”
He adds: “If we put somebody into an accelerated drawdown product there is a risk that in 10 years’ time they will have run out of money, are on the bread line and can claim against their adviser or provider.
“At the moment we do not even do capped drawdown without advice. We just do not want that regulatory risk on our balance sheet.”
Aegon regulatory strategy director Steven Cameron says: “The FCA needs to reflect on Government social policy. Government policy is saying customers can be trusted to manage their money in retirement and so for this to work coherently the FCA needs to start from that point too.”
Informed Choice managing director Martin Bamford says: “Advisers are not going to suddenly switch from annuities being the main option to flexible drawdown. Providers are not going to accept the business without an adviser standing behind it.”