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Welcome news for savers in the Queen’s Speech

The Queen delivering the Queen's Speech

Last year’s Queen’s Speech tackled a number of issues, from the care system, energy reform, and consumer rights. We were hoping for a similar focus on the needs of consumers this year, and we weren’t disappointed.

The two pensions Bills are good news for savers and could help boost retirement incomes, provided the right consumer protections are in place.

The Pensions Tax Bill, originally announced in the Budget, will give people greater freedom over how they use their pension pot by removing the requirement to buy an annuity. We know that in the past the annuity market has not worked in the best interests of consumers and has not been competitive.

When we surveyed people in October last year, four in ten who were contacted by their provider as they approached retirement said they didn’t get a clear explanation that they could potentially get a higher annuity if they have certain health problems, or if they shopped around.

Trusting your pension provider

The lack of guidance and advice meant that the majority of people have taken the annuity offered by their existing pension provider, when they could have got a better deal on the open market.

Those who shopped around for an annuity were significantly more likely to feel satisfied with their annuity purchase (76%) than those who did not (52%).

With providers letting consumers down when they’re making this crucial decision, it’s no wonder that less than half of people coming up to retirement trust their pension provider to act in their best interest.

The key to making these new reforms work, and restoring trust in the industry, will be ensuring that consumers have access to genuinely impartial guidance and advice.

This means giving people personalised and one-to-one guidance to ensure they have clear information about all their options across the market and how to access the pension and savings they have. It should help them make a plan and tell them where to get regulated financial advice.

If this is done properly, people could be thousands of pounds better off over the course of their retirement.

The Private Pensions Bill could also increase retirement income by introducing legislation that allows for collective pension schemes which lower the risks of the investments and offer consumers greater certainty about how much pension they might receive. This will be welcome news for the thousands of people worried about how much they will need for retirement.

Retirement funds

Nine in ten people think it’s important to know how much income they are likely to get when they retire and 28% of consumers who had opted out or were thinking about opting-out of auto-enrolment pension schemes said that this was because they were concerned that they would get back less than they put in.

While this all sounds positive, it is vital there are high quality standards in place to ensure these schemes are run in the best interest of consumers.

The Government must ensure charges are set as low as possible, people are allowed to transfer between schemes without facing unfair penalties, and consumers are given clear information on the benefits and risks.

There should also be complete transparency about the financial position of funds so people can feel confident they are being enrolled into good value schemes and know that they will get back the money they were promised.

Retirement is a critical time in people’s financial lives and they deserve maximum help and protection when making these difficult decisions. We look forward to working with the Government and industry to help deliver this.

This piece first appeared on the Huffington Post.  


The changes announced in the budget are mostly good for me. The changes mentioned in the Private Pensions Bill will probably not affect me if they’re only open to company pension holders.

I would have rather they overturned Gordon Brown’s tax grab on pensions and upping the age you can draw down from 50 to 55, that would certainly affect a lot more people than would benefit from “pooled” pensions. The latter would certainly benefit me now, but I’d probably wait until 2015 when I’d be paying less tax on that money.

I find it surprising that only “nine in ten people think it’s important to know how much income they are likely to get when they retire” – I assumed everybody wanted to have some idea. When considering percentages of the population eligible to contribute towards an occupational pension we need to bear in mind that (a) a lot of people in this category are making no pension provision at all and obviously wil not be expecting an annuity, (b) many people are not in an employer’s scheme but have personal pensions, (c) a very large number of people are in defined-benefit schemes [nearly all public servants and large numbers of people in the private sector, like the railways, utilities and many major companies] and will not need to buy an annuity upon retirement, and (d) a possibly even bigger number who are in defined-contribution schemes and probably will have to buy an annuity with their accumulated fund. This last category is the critical group and the numbers are growing as more and more organisations with existing defined-benefit schemes are closing them to new entrants and admitting them to defined-contribution schemes. The requirement to purchase an annuity, the restriction on subsequent transfer to an alternative provider, the inadequacy of advice on choosing an annuity, the poor performance of annuities in recent years, and the management charges applied to annuities [and other pension plans] have all been major drawbacks to this increasingly widespread form of pension provision. The other serious disadvantage with annuities has been the fact that each individual annuitant has a personal, separately invested, fund: this has meant that management costs have been higher than necessary and that the fund has been invested too narrowly. The new measures will loosen most of the restrictions on annuities and pave the way for collective schemes where investments and returns are pooled. Taken together these are good moves that, if exercised cautiously and prudently, should bring benefits to most contributors. The key will be in the quality of advice that employees will receive when making their choices and it is not too early for Which? and other organisations to start setting out some of the approaches that institutions should follow in preparing people for these important decisions. It has been pointed out in previous Conversations how many people are postponing making any provision for their retirement, or not making sufficient provision. The forthcoming changes to the actions that can be taken on retirement, together with the greater range of options and the characteristics of each type of pension provision, demand that a substantial information and education programme is introduced and that competitive providers are properly regulated so that there is no mis-selling and no misrepresentation of the benefits deriving from each choice.

Michael Mason says:
7 June 2014

The very first boast the Government had the Queen make in the latest Queen’s speech was that interest rates remained at a record all-time low. When I took out a mortgage on my flat and borrowed money to start a business, the bank rate was 15%, I have just retired and started drawing a pension when rates paid to savers have never been worse.

And this is “Welcome news for savers…”? Forgive my hollow laugh.

I felt compelled to agree with above post having worked all my life and tried to save a little for retirement. With the terrible interest rates for several years my savings are fast disappearing and I feel very angry that anyone who retired in the past four years has had to pay for the banking crisis.Not that this would affect our MP’s. We seem to have been “sold down the river” to coin a phrase.I too remember paying 15% on a mortgage. I expect when all the money runs out and some of us have to turn to the state, we will be subject to pillory for not providing for retirement.I would advise people to put money into anything but a pension!

I can remember the days of 15%. I had 2 mortgages at the time.

Richard Riley says:
19 June 2014

Many people (including the author of the article) are still appear to be confused about the difference between “saving” and “investment”. When you contribute to a defined contribution pension you are investing in units of a fund. You have the choice of where you want that fund to be invested, UK, USA, emerging markets etc. If started early enough that fund can ride out the ups and downs of the stock market and provide good returns so that your pension pot can be used to buy an annuity at retirement.
Alongside this you must have cash savings which provide your secure rainy day money or for shorter term purchases. The price of that security is a lower return, currently 0.5%. Savings are never meant to be an adequate replacement for a pension.
Which must stop viewing “investor” as a dirty word. We are all investors.