The Government must provide reassurance that the regulatory regime will not change radically overnight, argues Graham Vidler
There are but days to go until the Government’s pension freedom reforms come into force. And it’s safe to say the industry is collectively holding its breath.
Plenty has been said about the tight timescale by which schemes have had to implement the changes − DWP’s final regulations were only published on 9th March, less than one month before they were to be law.
But with pension freedoms imminent, it’s important to remember that next Monday is not the deadline, it’s only the beginning of the work to be done.
The NAPF’s message to the millions of people likely to be most affected by the new pension rules is ‘take your time’. It’s an important message for people making any far-reaching financial decision, but it’s especially important in the new, untested world of Freedom and Choice.
The evidence indicates that choices will be limited on 6th April. And there is now a growing consensus that the new pensions system needs ‘default pathways’ to make it really work for savers. In our view these defaults shouldn’t be defaults in the purest sense; rather they should take the form of a small number of clear pathways which are made available to the saver when they want their money.
The evidence indicates that choices will be limited on 6th April”
Savers would still have the full range of choices available to them and could use Pension Wise to evaluate the default pathway on offer against other options and then decide which may be more suitable for them.
There are, as it currently stands, a number of barriers preventing default pathways.
Political uncertainty ahead of the General Election is one significant obstacle. There is a lack of regulatory clarity, particularly in the new area of trust-based drawdown solutions. And let’s not forget, there has been an incredibly tight timescale for implementing the reforms.
These factors mean the industry cannot confidently build new solutions; savers cannot be confident of a default option that reduces the risk of poor decisions; and schemes cannot be confident their members stand the best chance of a good outcome.
Pensions are political but their primary purpose is for people to be assured of an income in retirement”
If the industry is to provide good default retirement income options for savers the Government must also play its part by providing reassurance that the regulatory regime will not change radically overnight again.
Pensions are political but their primary purpose is for people to be assured of an income in retirement – this should be the focus and priority of any regulatory change.
Savers deserve, and the industry needs, a standing independent retirement savings commission to oversee the long-term health of retirement saving and income in the UK.
Graham Vidler, director of external affairs, NAPF