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Steve Webb: Pensions industry set for ‘decade of innovation’

Pensions minister Steve Webb says the retirement industry faces a “decade of innovation” from next April as the new Budget freedoms adjust to a changing market.

Speaking to a fringe event at the Liberal Democrat conference in Glasgow yesterday, Webb said the growing size of defined contribution pots through auto-enrolment will have a big impact on retirement income products.

From next April anyone over 55 can take their pension pots in full subject to marginal tax rates, with providers expected to launch a series of new products in its wake.

Over the weekend, Webb said he would watch the industry “like a hawk” as it developed new products under the freedoms but yesterday he hinted the regulatory environment should not be too heavy-handed.

Webb said: “On products innovation, my hunch is that people will enjoy the new freedoms by taking some cash – a few thousand pounds is a lot of money and they will be able to do something that gives them a lot of satisfaction such as take a trip or give it to the grand children, it will be different for every person.

“The vast majority of people need the money to live off so for the foreseeable future most people won’t actually have a huge amount of choice, they will need the money there and then. They may take an annuity a bit later and it could be more flexible. I think this will evolve as DC pots grow so while some are talking about innovation next April, we face a decade of innovation to be honest.

“But I do wrestle with how we regulate products in retirement. We have gone for quite a heavy handed regulation in accumulation as people aren’t making choices and the market isn’t really a market, therefore we need to keep it really simple and good value.

“It is a bit different in decumulation as it is the individual making choices for themselves but they are are still very complicated choices so consumer protection remains very important. Exactly how that looks we will have to keep an eye on.”

Webb also said regulation must focus on the “bunch of scumbags” who could move from pensions liberation scams to conning people out of their freed up pension pots.

Financial Services Consumer Panel member Jeff Salway says the advice market will see most innovation in the next few years.

He says: “I think innovation will come from advice in online systems. The UK industry has been quite slow, especially pensions, to develop these type of services but it starting to happen in advice now. There could be an advice decision tree online as it as a low cost advice services so that is where most innovation will come in the next few years rather than products.”


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. When a politician says this you can bet they are going to muck things up again.

    The best thing they could do is just to leave things alone – fat chance. Pity they don’t fiddle with their own pensions to the same extent – except to make them better for themselves.

  2. Webb said: “On products innovation, my hunch is that people will enjoy the new freedoms by taking some cash – a few thousand pounds is a lot of money and they will be able to do something that gives them a lot of satisfaction such as take a trip or give it to the grand children, it will be different for every person.”

    So pension legislation is based on a hunch?

  3. I have to be honest here ! he has made a few good (common sense) statements, heavy handed regulation, pension liberation and client freedoms

    But he kind of spoilt it with the old innovation from on-line systems ? personally and from my experience I think not ! yes, it can take you so far but you will always need human contact at some juncture, and can a computer program actually give advice yes its factual but advice ? just my honest opinion.

  4. My fear is that endless innovation is likely to create ever more complexity, confusion and expense for consumers as advisers strive to find the best way through it all. What we need is simplification. If only one of the really big players such as Prudential could lead the way with an Assured Income DrawDown product….

  5. He says:“But I do wrestle with how we regulate products in retirement.”
    I guess that he means like the regulation that freezes the pensions, meaning no annual increases for about 560,000 ex-pat pensioners without justification just because of where they live while giving the nod to about 650,000 ex-pats also abroad with his blessing !
    The headline talks of decades and it is fact that this policy is not of his invention but that of governments past as well and has been perpetrated for decades and decades.
    Where ? Well hit the Commonwealth where we are family, haha but not really very funny. There are other countries as well.
    To deny a pensioner who has met all of the requirements for an indexed pension but then deny that indexation dependent on the country that they retire to is discrimination and unfair, irrational and illogical and makes no sense. Beyond that it is immoral.
    Read what Iain Duncan Smith said on May 2nd.
    “I believe you can judge a government’s values by how it treats the country’s pensioners.
    The vast majority of our pensioners are not relaxing at home without a care in the world. For many, retirement is about careful budgeting, while still trying to help out their families. Again, how government responds to this is a mark of their priorities.
    It is that desire to do the right thing which was behind the Prime Minister’s pledge to protect universal pensioner benefits for the lifetime of this parliament and that’s what we’re doing. I make no apology for it. The policy has not changed.
    Pensioners have contributed to this country throughout their working life and they have all earned that universal benefit.
    This government can be proud of what it has done, and continues to do, for our pensioners. This is a measure of what we think is important, not only as government, but as a country.”
    So there it is, the word of a politician that is meaningless but sounds good to those that do not know the real situation in respect to the fraud he condones.

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