Savers will receive ‘free, impartial’ guidance on how best to invest their pensions under Government reforms, the Treasury has promised.
The reforms, announced in this years Budget, will from 2015 allow savers full freedom to use their pension savings as they wish. Those who pay into pension contribution schemes will no longer have to buy an annuity, giving them unrestricted access to their pension pots.
Ministers and campaigners have raised concerns that people will make poor decisions if they are guided by pension providers that are “trying to flog them products.” There are also fears that people will spend their pension money too quickly and struggle financially after retirement.
In order to provide people with solid, unbiased advice, guidance will now be through independent organisations, which will be paid for by a levy on the regulated financial services industry, the Treasury today announced.
Guidance will be provided face-to-face, by phone or online.
In a statement Chancellor George Osborne said:
“We’re making sure that people have the right support to make their own choice about how best to finance their retirement and I’m pleased to confirm that everyone with defined contribution pension savings reaching pension age will get free and impartial guidance on their range of available choices at retirement.
The government wants to ensure that guidance is trusted by consumers, and the vast majority, including most of the financial services industry who responded, said that consumers would not trust guidance given by a person or organisation with a vested interest in selling a financial product or service.”
The Treasury said around 300,000 people with defined contribution pension savings will be able to access them as they wish from April 2015, although only the first 25% of money taken will be tax-free.
The pension reforms have led some financial analysts to question how the insurance industry will be affected by the predicted fall in demand for annuities.
Photo by Pedro Rosimoes