The government’s pension reforms still raise many “questions and uncertainties”, the National Association of Pension Funds (NAPF) has said.
The industry body submitted 101 questions to the government in response to the Pension Schemes Bill – the legislation that will introduce the pension reforms announced in the 2014 Budget.
From April 2015, members of defined contribution schemes will be able to take their pension in multiple lump sums without having to buy an annuity or open a drawdown account. A quarter of each lump sum will be tax-free and the remaining 75% will be taxed at the individual’s marginal rate.
However, the NAPF said that many retirees will be confused by the changes and that some schemes will not be ready to implement them. In their response, the NAPF said:
- some pension schemes may not be ready to deliver the reforms by April 2015
- some schemes are not ready to give their members information, which could lead to inconsistency and confusion
- guidance for some products may only be accessible through a financial adviser, which could be too expensive for some people
- there is an “urgent need for further clarity” around the guidance service
- retirees may find it hard to make the complex decisions even after receiving guidance.
Earlier in the year the government announced that it would launch a free and impartial guidance service to help retirees make decisions over their pensions. The service would be:
- provided by The Pensions Advisory Service and the Citizens Advice Bureau
- offered over the internet, by phone and in face-to-face sessions
- funded by a levy on financial services firms.
Responding to the announcement, John Cridland, director general of the Confederation of British Industry, said the policy would be a “huge challenge”:
“The key to success will be swiftly expanding the infrastructure needed to accept tens of thousands of requests for guidance each year, and ensuring people receive high-quality advice to make informed decisions about their futures.”