Pensions minister Steve Webb says he will watch the pensions industry “like a hawk” as it develops new retirement income products in the wake of new pension freedoms from next April.
In his keynote speech to the Liberal Democrat conference in Glasgow yesterday, Webb said the pensions industry is well known for its “horror stories” and he would be ready to intervene if products could harm consumers.
Pension providers are expected to develop a raft of new retirement income products based on the ability of all over 55s to access their pension pot in full from next April instead of defaulting into an annuity.
Webb said: “We will need to make sure that as the financial services industry creates new products and options to meet these new freedoms, we put the consumer front and centre of our approach.
“While it is difficult to regulate products that don’t yet exist, I am clear that as a Liberal Democrat that we must watch the industry like a hawk and step in if necessary to make sure we do not have a repeat of some of the past horror stories for which the pensions industry has unfortunately become all too well known.”
In a wide ranging speech on the future of pensions, the Liberal Democrat MP also said he would push to introduce the automatic escalation of pension contributions in the next parliament so that with every pay rise employees automatically put an even higher percentage of their wage into their pension pot.
Webb said: “Having got millions of people into workplace saving we need to get them saving more than the bare statutory minimum of 8 per cent. I am quite attracted to the idea that when you start a job the norm is that each time you get a pay rise a part of the extra cash goes into your pension, building up gradually to a worthwhile sum. You could opt out of this ‘automatic escalation’ but unless you actively chose to opt out you would gradually contribute more.”
Webb also repeated his desire to see wholesale reform of pensions tax relief in the next parliament to stop the wealthiest receiving the largest benefits.