This follows the government’s consultation on how best to deliver the radical changes to how people access their pensions announced at the Budget.
In total 18 million people will be able to benefit from the changes to pensions should they wish to do so.
From April 2015 300,000 individuals a year with defined contribution pension savings will be able to access them as they wish when they turn 55 – subject to their marginal rate of tax.
This is the biggest change to how people access their pensions in almost a century, removing the effective requirement for many to purchase an annuity.
The government’s response to the consultation today confirmed that the guaranteed guidance on pensions choices will be provided by independent organisations rather than pensions schemes or providers, and that a new override will be introduced so that pension schemes can offer consumers flexible access to their savings.
Chancellor George Osborne said:
"These reforms mark a radical departure, by giving choice back to individuals, and since the Budget the government has consulted extensively on how best to implement the changes. I am pleased to say the reforms have overwhelmingly been positively received."
On DB pensions, John Cridland, CBI Director-General, said:
“This new flexibility will give people the freedom to choose how to spend their retirement savings.
“Pension holders should be able to convert their defined benefits into cash, if that’s based on sound financial advice and is in the interests of the wider scheme. We don’t believe that there will be a significant flight from DB schemes, as some fear, because many people like the security of a reliable income so we don’t expect a major impact on the bond markets.”
Steve Wilkie, managing director of retirement specialist Responsible Life, comments:
“There was always the worry that giving people greater freedom to do what they want with their pension pots would leave many exposed to far too much risk. It’s a big leap from the security that an annuity offers to basically giving someone with little investment knowledge a pot of cash and just leaving them to get on with it. It’s important to remember that these decisions we’re asking people to make will affect them for the rest of their lives.
“Although the pension changes were universally well received, when they were first announced, it now seems to be dawning on the Government that they might be throwing people into stormy seas without a life-jacket. There needs to be a strong support network to help people make the right retirement decisions, and although free independent advice for all makes sense, there will be questions asked about the quality of the advice be given.
“On the one hand, it will provide people with a level of comfort knowing there is someone they can speak to for free who will give them impartial advice. But how comprehensive will that advice be? The likelihood is it will be too simplistic and not individiually tailored enough to provider savers with a clear retirement plan."
