MPs call for a more flexible pension landscape – about time

Thoughts on a recent report from the Work and Pension Committee

A call for more support with pension decision-making

Two passages jumped out at me from the latest foray by MPs into the pensions forest.

I say “forest” because even for these well advised and, in some cases, personally knowledgeable political representatives, it could be a step into an unfamiliar landscape.

As I’ve said before, the reason companies like Punter Southall Aspire thrive is because businesses and people genuinely need help to navigate the thorn bushes and dark thickets of the pensions and retirement market in order to make the most of what are still proven advantages.

The impact of pension freedoms

One of the key conclusions from the Work and Pension Committee’s report into the impact of pension freedoms was a call for the government and the regulator to play a more active role in helping people make “better” decisions. As the report says, 'many savers need more support than they currently receive in order to make good decisions about how they access their pension savings'.

Hear, hear. It’s a sentiment we can all get behind. While the committee found that, by and large, the freedoms had been a success, more people are in need of further support.

Many had turned to the government’s own service, Pension Wise, and the committee want to increase uptake by 60 per cent for its free appointment-based guidance (not advice, to be clear). This, too, is to be applauded.

But back to the two areas that caught my eye.

Midlife MOTs

The first spoke my language and is worth spelling out in full: “The committee welcomes the principle of a midlife MOT, where there is free support for people in their 40s, 50s and 60s to make plans about their futures, but calls on the Department for Work and Pensions to undertake research to ensure the financial aspects of it work effectively.”

The thread running through our employee benefits consulting and financial planning is to nudge people towards thinking about what the future beyond work holds. Our Aspire to Retire retirement communication service is centred around this and rests on a simple proposition: planning for your retirement could help you to retire better.

Given that the WPC is currently in the stage of consulting on how to help people save to plan for retirement, we will be contributing to the consultation by offering our considered view on just that.

Greater flexibility

The second interesting finding was the call for research to see if it’s feasible to allow people at 55 to withdraw the 25 per cent tax free amount from their pot but leave the rest intact and invested. At present, this can only be done through drawdown, resulting in individuals often making short-term decisions purely to access their cash lump sum.

This was part of a view gaining greater acceptance that people would benefit from further flexibility, to be able to fund later life with a mix of annuities, lump sums and drawdowns, something MPs want the Money and Pensions Service and the Financial Conduct Authority to encourage actively.

In short, pensions need to reflect more closely how much life, work and saving has changed since they were first conceived centuries ago.

Later this year, we’ll have our own announcement to make in line with this effort to really help savers to make the most of a market that is steadily being turned towards their needs and the realities of their lives in the 21^st century. Watch this space.