Pension reforms – opportunity and risk


Pound coins - Photo: Flickr user hitthatswitch
Photo credit: hitthatswitch, Flickr Creative Commons 

April 2015 will represent a landmark day for pensions, with an end to the requirement to use a pensions ‘pot’ to buy an annuity. For better or for worse, people at point of retirement will hold their own futures in their hands, with decisions taken at this time having implications that can be felt for many years to come.

Age UK has welcomed greater flexibility, but it’s clear that the rapid speed of change has led to significant challenges ahead for the government and the industry, as well as – most importantly – ordinary pension savers.

Disengaged savers

Age UK recently published an independently-written report, Dashboards and Jam-jars, which looked at some of the main issues facing people with average-sized pension pots. It highlighted some of the main problems that could arise – for example paying too much tax or running out of money – and suggests what can be done to mitigate these.

However with new research from the Pensions Policy Institute showing that the majority of people simply haven’t planned for their retirement, it seems we will need to see a seismic shift in engagement in retirement decision making if there is to be a good prospect of long-term success.

Age UK is determined that disengaged savers, who often have smaller amounts of savings, get reasonable outcomes throughout their retirement. Only this can mean the reforms can be a good thing for everyone.

Achieving this will mean that the Government needs to ensure that Pension Wise, the Government’s new service to support people at retirement, is maximising its reach and providing a service that actually helps typical consumers; that the industry is developing products that offer good value for lower net worth customers; and that the regulator, the Financial Conduct Authority, does not neglect its duties to put consumers at the heart of the process.

Age UK’s eight point plan

In December 2014, we published our eight point plan for Government to help average savers get the most out of the reforms. We are calling for:

1. Tools to help people avoid running out of money or paying too much tax
2. Integrated decision making with State Pensions and other benefits
3. Quality standards for income drawdown products
4. Guidance to ensure lenders treat people with small Defined Contribution pots fairly
5. A strong lead agency to combat scams
6. A ‘second line of defence’ for those who do not take up guidance
7. Suitable defaults to reduce the risks of making poor (or no) decisions
8. A duty on Government to report regularly on the outcome of the reforms

All these are important in ensuring that typical savers do not lose out. Anything less means many people could make the wrong choices, and end up much worse off.

Read Age UK’s pensions report Dashboards and jam-jars 

Read consumer advice about money matters on the Age UK website 


4 thoughts on “Pension reforms – opportunity and risk”

  1. Age UK you know that most of the thousands of women affected for the second time by the accelerated state pension age rise have no opportunity to do anything with a pension pot because they don’t have one! This seems to be all about those fortunate enough to have worked in jobs where they had the chance to save for a private pension, these women who started work at 15/16 when there was no equality of wages with men, had no chance to save. They are still devastated, the women with jobs are struggling with age related complaints and wondering how they can cope longer. The jobless ones are living on JSA with no chance of a job at 60+ but hounded to look for work. The ill and disabled ones are worrying will they be taken off sickness/disability benefits. These women had no written notice in 1995 about the first state pension age rise, so many didn’t even know that the retirement age is now on a rolling scale. So to be hit a second time seemed like 6 years extra working life all at once! We are still fighting the second age rise even though Age UK has deserted us, because it’s unfair and it’s discriminatory and it was at too short notice. Surely Age UK is for ALL over 50s, we are disappointed and upset to be fighting this alone while Age UK are welcoming all the changes the coalition are making, without another thought to how these women, especially single woman and widows with no support, are still struggling to adjust their plans .

  2. It is not Right this government have raised the pension age thus robbing thousands of us of our NI contributions ,while MPS age of retirement stays the same and they give themselves a 25 percent raise on theres as well.This is a disgrace.

  3. I understand the need for people to have a say in how pension pots are used, but I am sure the goverment are encouraging this to happen for reasons not immediatly obvious and for very short term gain. Many people will spend pension money on having a good time ( and why not ) resulting in falling very short of having enough money in later life. Maybe those in the know believe that pension pots will be used as mortgage deposits for young family members ( helping to alleviate housing crisis) or that so much money will get spent they will have to raise interest rates…….either way it is very risky, very short sighted and I cannot understand why more fuss is not being made about this. Safeguarding people in later life surely also includes safeguarding their assets and not leaving them particularly open to all the unscrupulous individuals that will be after their little pots of gold…..often including family members and setting up a huge store of trouble for the future.
    As for raising the pension age, dont get me started, I fall into the bracket mentioned by Ruth and totoally agree with Ralph.

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