Today we’re publishing our response to the HM Treasury consultation on Freedom and Choice in Pensions. The reforms would let people use their private pension pot as they like once they reach a certain age (currently 55), from April 2015. At the moment, most people have to buy an annuity or face being taxed at 55% on money they withdraw.
At The Money Charity, we support the basic principle of the reforms that people should have more control of their finances, but there are several potential unintended consequences of the reforms that have to be addressed if this is going to work.
Key to the success of these reforms is the ‘guidance guarantee’ – government has promised that everyone will receive some sort of guidance on how to use their pension pot when they retire, but hasn’t provided details on what this will consist of. We believe that in order to be effective, the guidance guarantee must meet the following criteria:
- It must be tailored to an individual’s situation;
- It must come to some form of conclusion; and
- It must provide ongoing support throughout retirement (i.e. not just be a one-off session).
If it doesn’t meet these, there’s a serious risk that it will be ineffective and could lead to considerable detriment to individuals and their families.
To read our full response click here