UK pension reforms worry industry

Companies say that nothing is being done to educate the insured on the changes

The pensions industry has accused the UK government of failing to prepare properly for the launch of its overhaul of the retirement market in six weeks time.

Radical reforms, announced by George Osborne last year, will give millions of savers aged 55 and over the flexibility to cash in savings built up in “defined contribution” pension pots. But with signs that hundreds of thousands of savers are preparing to make use of the new rules from April 6, the Association of British Insurers, the trade body for the multibillionpound pension industry, says key policy detail is still missing.

“The government has simply not been able to deliver enough at this stage to ensure the reforms have a flying start when they go live,” Huw Evans, director-general of the ABI, said. “Critical pieces of the jigsaw are still missing and will not be in place in time.”

The ABI said it was still waiting for clarity in six key areas including new tax rules and on Pension Wise, the free guidance service designed to act as an information safety net for savers accessing their pensions flexibly.

“No ‘ifs’, no ‘buts’ we want these reforms to work,” said Evans. “However, it is impossible to stand here six weeks before 6 April and say the government is ready — that is a statement of fact, not an attribution of blame.”

Under fire

The comments come after the government was criticised in parliament on Tuesday for not providing enough clarity on how cashing in a pension under the new rules would affect means-tested benefits.

Gregg McClymont, shadow pensions minister, urged the government to take “rapid action” to ensure benefit claimants were not inadvertently left in a worse position after accessing their pension savings. Malcolm McLean at Barnett Waddingham pension consultants said: “There are many within and beyond that industry who have deep reservations about the impact and wider repercussions of the radical changes that are coming in and are very suspicious about the political motivation for them.”

A Treasury spokesperson said: “We welcome the ABI’s commitment to these new freedoms and will continue to work with industry to ensure we are all ready.

“We agree that people should take their time and not rush decisions. Pension Wise will help them understand their options and make an informed choice.”