More choice for pension savers, but will the products follow?

Scrabble pieces spelling 'ANNUITY'Last week George Osborne confirmed the Government’s intention to implement the surprise tax changes he announced in the Budget in March. At the same time the Government and the Financial Conduct Authority have set out more detail on what guidance will be available to people to help them make their choices at retirement.

The changes mean that there is no longer a requirement to purchase an annuity (a product that provides a guaranteed income for life) – meaning that people will have more choice as to what they can do with any pension pots they have from defined contribution pension schemes.

Increased choice is welcome but Age UK argues that people needed access to impartial guidance to help them make their choices. It seems the Government agrees with us.


Guidance, free at the point of use, will be provided by independent organisations, with both the Pensions Advisory Service and Money Advice Service playing significant roles in delivery. We are also pleased that there is a commitment to ensure that people who need face to face guidance will be able to get it.

There is an enormous amount of work and not much time left to get this guidance in place for April 2015 and Age UK looks forward to working with Government and other agencies to make this a reality.

Last week’s announcement also sets out more detail on the changes to tax legislation that will be enacted in a Pensions Tax Bill during this parliamentary session. The Government wants these changes to act as a spur for greater innovation in retirement income products – something that Age UK highlighted was needed in our recently published Financial Services Commission report.


We’d like to see more products available that complement actual retirement spending patterns, which can fluctuate, so welcome some of the changes that could see products come to market that enable a greater degree of flexibility.

But it remains to be seen what products will develop and who will be able to benefit from them. People with large pension pots are already able to achieve a degree of flexibility in how they convert their pension pots.

Age UK is clear that innovation must be in the interest of consumers, particularly those with modest pension pots who have traditionally been very poorly served by the financial services industry. The challenge for product providers will be to develop products with greater flexibility, without making them overly complex – and all at a reasonable cost.

We fully appreciate it will not be easy and we look forward to seeing how the regulator will ensure that competition in this market really works for consumers and what products and services the industry can come up with.

Photo credit: Lending Memo licensed under Creative Commons Attribution 2.0 Generic license

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