The Later Life Academy (LLA) has provided a written response to the Work & Pensions Committee at the House of Commons on its inquiry into whether, and how far, the pension freedom and choice reforms have achieved their objectives and whether policy changes are required.
The response deals with a number of areas highlighted in the scope of the Committee’s inquiry such as what people are doing with their retirement savings, how they chose their paths, the information and guidance available, and the way the pension product market is working.
The LLA believes that Pension Freedom is the correct policy for the way society is changing, with regards to attitudes to retirement, when full retirement occurs and how people transition into retirement. It also believes Pension Freedom is the correct policy for the vast majority of people who have insufficient pension savings to provide a meaningful lifetime income.
The Academy also argues in its response that solutions for those individuals who can afford to pay for their advice on how to use their pensions may not be appropriate for those who are not in such a fortunate position. It suggests that Pensions Wise guidance may therefore need to be extended in order to help those who, for example, will need to use their housing wealth to finance their retirement.
It suggests that guidance should be provided to those individuals with small amounts of pension savings, who are going to be on means-tested benefits, for example, housing benefit, throughout their retirement, to ensure they do receive some benefit from their pension savings.
The LLA argues that the advice and guidance market needs to adapt to this world – only then can the automated advice and guidance technology move in to provide appropriate solutions for the individuals they are serving.
Bob Champion (pictured), chairman of the Later Life Academy (LLA), said: “Our aim in providing this response is to urge the Committee to use the inquiry to look at the wider environment in which Pension Freedom reforms exist and to make judgements and recommendations based on the overall outcomes to the customer. Given the situation for many people who reach retirement with inadequate pension income to draw upon, it’s also important that guidance moves beyond pensions, and looks at how this group of people can improve their income in retirement using all the resources available to them. Our view is that pension guidance on its own is not sufficient, as it does not relate to the context in which the individual finds themselves.
“Having said this, we do believe that the Pension Freedom Reforms were the right policy for the right time, allowing individuals to match what pension savings they have to their circumstances and needs, taking into account other potential sources of income. These freedoms can make a large difference to those who get the correct support – we would therefore urge the Committee to focus on the support needs of individuals to obtain the best outcomes from the reforms; we do not believe there is anything wrong with the reforms themselves.
“Finally, in terms of advice, individuals have a lot more to consider than their pension options when deciding how to finance their retirement. Unfortunately, there are only a restricted number of advisers who can help individuals plan – taking account of their holistic wealth, including their home, or impacts on means-tested benefits. We therefore need to address the provision of advice, and the number of advisers, in this area if we are going to have a fully-rounded retirement income advice offering which can service a far greater number of clients. This is clearly outside the remit of PensionWise but needs to be considered if we want to have individuals making far better choices about their retirement and how they fund it.”