The Government's pension policy has come under fire from an unexpected quarter – one of its own backbenchers.
John Butterfill, who is somewhat of an expert when it comes to pensions,as chairman of the all-party group on occupational pensions and trustee of the Parliamentary contributory pension fund, believes the strategy is fatally flawed.
His main gripe is the fact that you have to buy an annuity with all your pension fund (less tax-free cash). Worryingly for IFAs, Butterfill believes that anyone selling a pension under the current regime is guilty of misselling because of this compulsion to buy an annuity.
He claims that, because of this compulsion, virtually every other tax-efficient savings scheme, from Isas to enterprise investment schemes and VCTs is preferable to a pension.
This whole area of compulsion has been the subject of much scrutiny over the last couple of years with many high-profile names campaigning for abolition. The list includes former pensions minister Frank Field, ex-Labour MP turned regulator Dr Oonagh McDonald and both main Opposition parties.
What Butterfill proposes is that, in future, a retiree need only secure a guaranteed minimum income to last them through their retirement while the rest of the pension pot becomes a tax-free lump sum – although this is unlikely to be popular with the Treasury.
Surely the Government, if it is to achieve greater pension provision, should bow to these calls to scrap compulsion, as it stands in the way of many investing in a pension.