Labour’s new shadow pension minister has called for greater advice and guidance from Pension Wise, arguing it is the government’s obligation to ensure more people get advice because it has opened up the pension mark.
In his first public appearance since taking the shadow pensions brief from Lord Bradley, following a reshuffle by leader Jeremy Corbyn, Nick Thomas-Symonds, MP for Torfaen, told a Social Market Foundation/Standard Life event at the Labour Party Conference today that he is not ideologically opposed to the pension freedom and choice reforms, but argued that it is incumbent on the government having opened up pensions in this way to ensure people make the right decisions.
In a wide-ranging debate Standard Life head of pensions strategy Jamie Jenkins highlighted some of the complexities of implementing a switch away from tax relief towards an Isa structure for pensions. Caroline Rookes of the Money Advice Service argued that pensions will have to adapt to embrace new generations approaching retirement while still paying rent.
Corporate Adviser editor John Greenwood, also on the panel, highlighted the fact that the first generation of drawdown customers have already got off do a bad start, with markets down around 15 per cent since April, predicted that in years to come the freedoms could be reined in to exclude those eligible for state benefits from accessing them.
Thomas-Symonds said: “I have been surprised in my first 10 days in this brief at the enormity of these changes and how little understood they are. There has to be very good publicity about accessing advice.
“Of those that have taken advantage of the pensions freedoms the statistic is very worrying – 205,000 have made withdrawals in the first few months and only 18,000 have had a consultation. That is worrying.
“The government needs to do more on Pension Wise. At the moment there is one 40-minute session and I do not think that is enough. I am not ideologically opposed to other sectors giving advice. But given the government is giving people these freedoms, in needs to do more in terms of what PW provides but secondly in terms of how it all is publicised.
“I don’t think there is a contradiction between the idea freedom and choice and what the historic role pensions. Clearly there is a historic collectivist idea behind the old age pension. That is why the Asquith government introduced it, that is why the Atlee government developed it after the second world war.
“One of the problems with annuities is people have ended up the prisoner of poor annuity rates at the time they retired, particularly as people are generally living longer.
“But at the same time the freedoms need to be thought about very carefully and subject to very robust scrutiny.”
Jenkins says: “We talk about Isas and people say how much they like them and I would agree with that but what people don’t remember is the contributions are made out of taxed income. With pensions some people are paying 40 per cent up front and 20 per cent in retirement, or 20 per cent up front and nothing in retirement. And there is a certain unfairness in that.
”Turn that on its head and you have people paying into an Isa at 40 percent or 20 per cent and saving tax at the other end at 20 per cent or zero. So they are not saving the tax they are paying up front. People don’t really think about that because they think of the product as being tax-free. So these issues need to be properly thought through.”