Government unready for pension reforms, ABI say
It is expected that around 200,000 people will try to withdraw their retirement funds in the months succeeding introduction. However, Evans believes the government is ill-equipped to deal with the influx. Speaking at conference today, he noted that “critical pieces of the jigsaw are still missing, and will not be in place in time.”
Evans highlighted a number of key issues that the ABI felt the government had failed to resolve prior to implementation. These included technical shortcomings, such as the lack of clear tax rules on annuity payments to beneficiaries, the failure to release details of how lump sum payments by trust-based schemes will be regulated, and the absence of guidance on how providers need to interact with customers.
Evans also disparaged the absence of a dedicated phone number for Pension Wise (the free support service established to respond to queries and concerns about the new freedoms). He believes that retirees without internet access could be left in the dark about the specifics of the reforms, potentially exposing them to excessive taxes on the funds they draw down from their pension pots, and encouraging retirees to spend their money too rapidly.
Evans was quick, however, to counterbalance his comments with muted positivity, stating that while “it is impossible to stand here six weeks before 6 April and say the Government is ready,” the ABI “wants these reforms to work”. He urged retirees to not lose sight of the fact that 6 April was not a “deadline”, but “simply the start of new freedoms” – as a result, they should “not be rushed into making quick decisions.”
Last November, the National Association of Pension Funds released a list of ‘101 questions and uncertainties’ about the pension reforms. The government responded by accusing the NAPF of “scaremongering”, claiming its anxieties were “ill-founded”.
However, Tom McPhail, head of pensions research at Hargreaves Lansdown, agrees with Evans’ statements and concerns. “These reforms are overwhelmingly popular and in the long term will do much to reinvigorate pension provision in the UK – our worry, however, is that the reforms are being introduced so quickly. Many pension providers won’t be ready in time.”