Retirement and investment groups have wasted no time in calling for thenew pensions minister Ros Altmann to finish the job of overhauling the industry, with customer advice and protection at the top of the list.
The purdah period ahead of the election meant that The Pensions Advisory Service (TPAS), launched ahead of the pension freedoms on April 6, was scarcely advertised in its first month.
Pensioners have been granted greater access to their defined contribution savings, with tax implications in certain circumstances. The changes are accompanied by a Government pledge to offer everyone free and impartial guidance.
More than 229,000 peopled called their insurer in the first four days after the reforms came into force, more than double the usual level according to theAssociation of British Insurers, as savers grappled with the options available to them beyond a traditional annuity, which swaps a pension pot for a guaranteed yearly income.
“We’ve seen relatively few people with sizeable pension pots taking the whole lot out. What they tend to do is take out their tax-free amount to pay off debts or pay for a family event,” said Phil Loney, chief executive of Royal London.
“We’ve a lot of faith in TPAS as the vehicle for providing guidance but we hope Ros Altmann will look at cheap and cheerful advice. At the moment, financial advice is heavily regulated and expensive, and the preserve of rich people.”
Royal London reported a 40pc rise in the value of new business to almost £1.4bn in the first three months of 2015, including a 67pc rise in drawdown products to £244m and a 68pc rise in individual pension products to £474m. The mutual does not sell its own annuity products but offers products through a panel of other providers.
Vanishing demand for annuities has been keenly felt at Just Retirement, which on Tuesday reported a 22pc fall in total sales to £1.1bn for the nine months to the end of March. “The period before the introduction of the new pension freedoms was always likely to be tough for our industry, and so it has proved,” said chief executive Rodney Cook. “Under the circumstances, I believe the 15pc decline in total annuity sales which we are announcing today is a creditable performance.”
The FTSE 250 firm, like other life insurers, is launching more flexible retirement products to cater for savers keen to access their pension pots.
“It’s less than two months since the hard work of our industry helped ensure the biggest reforms in decades to the pensions system were implemented in what seemed record time,” said Joanne Segars, chief executive of the National Association of Pension Funds. “We’ve weathered the first wave but that was just the start – there’s much more to do to make sure savers’ interests are kept safe in the wake of the flood of recent reforms.”
Dr Altmann, a pensions consultant who was director general of Saga until 2013, will be appointed to the House of Lords in order to take up the ministerial post. She replaces Steve Webb, the Liberal Democrat architect of the reforms who lost his seat in the general election.
Liz Field, chief executive of the Wealth Management Association, said “it is vital to ensure that individuals know their options so that they may make an informed decision that best reflects their financial needs”. The trade body is seeking “a true cultural shift” in savings as millions of Britons start to contribute to their retirement through workplace pensions.
The Association of British Insurers is among the industry bodies calling for an independent commission to oversee long-term pension policy.