The Queen said innovation in the private pension market would be introduced alongside reforms which will remove the effective need for retirees to buy an annuity when they retire.
The introduction of collective pension schemes, similar to those in operation in the Netherlands, allows thousands of workers to enrol in one scheme giving greater economies of scale, lower costs and the potential for greater returns.
Reforms to at-retirement legislation mean people will be able to access their full pension pot – subject to tax – when they retire instead of being ushered towards buying an annuity. A guidance guarantee for all was also pledged by the Chancellor in his Budget.
The monarch also said the government intended to continue reducing the county’s deficit and cut taxes by increasing the personal allowance.
There will also be a programme of deregulation and penalties for firms that fail to pay workers the minimum wage.
TISA operations director Carol Knight commented: “We applaud the increased focus on savings for retirement. Giving people more choice in how they save, complementing the recently announced increased freedoms regarding the options at retirement, is a positive step towards ensuring that people build up a pension pot sufficient to meet their needs.
“We look forward to continuing to work with government to make their proposals work to help deliver more choice and more competition. Together, we believe that will be good for people saving for retirement, and good for saving.”
>How will advisers fit into Osborne’s guidance guarantee? <
| Two steps forward, one step back?
Kate Smith of Aegon on the planned collective defined contribution (CDC) plans… As a Dutch owned company, Aegon UK is in a unique position to understand what CDC would mean for UK savers, and at first glance it looks like this is a case of two steps forward one step back for pension reform. The 2014 Budget has given individuals more flexibility about how they take their pension – whether as an income or lump sum once they reach age 55, under the Dutch CDC model there are no such flexibilities. People can only receive their pension at the time and in the format set out in the scheme rules leaving them little room for manoeuvre. Getting the UK ready for retirement needs simple, reassuring and digital solutions not more complexity. The scheme does have its merits. The collective buying power would offer benefits through economies of scale and could provide higher investment returns than personal pensions, but the move doesn’t reflect trends in UK society. The Aegon Global Retirement Readiness Report 2014 revealed that only one in three UK workers currently expect to have a fixed retirement date, so the constraints of a CDC scheme would severely damage the retirement plans of the remaining 71%. The new legislation will allow employers and providers to set up CDCs from 2016, but it’s unlikely the industry will be so fleet of foot as they continue to focus on delivering choice and new ways for customers to engage in saving for retirement. Only the very largest employers, those who continue to run defined benefit schemes, are likely to be interested. |
