People find pensions complicated, this we know. So, as political parties do their best to woo the electorate, the Association of British Insurers (ABI) has identified three areas in which a new government can improve the pensions system by making it fairer, safer and simpler for consumers to understand and for employers and providers to manage.
First: simplify pensions tax relief. The current rules are confusing and unfair; tweaks to save money have made it complex for everyone and led to negative consequences for public services and private employers. Another quirk of the system means that some low earners, disproportionately female, miss out on the tax relief that others receive. The ABI wants to see this disparity resolved and the allowances reviewed or scrapped.
Second: deliver pensions dashboards. Lost pensions: What’s the scale and impact?, published by the Pensions Policy Institute (PPI) in October 2018, found that 1.6 million pots could be remaining unclaimed, amounting to almost £20 billion.
Pensions dashboards will enable savers to view all their pots together in a place of their choice online, making it easier to take action. Consumers will choose where to access this data, whether via their provider, employer, bank or a new app, so it is important to create a well-regulated market for dashboards. The recommendations of the pensions dashboard prototype project we led are being taken forward; it is essential that, whoever ends up in Number 10, the momentum continues.
Third: provide safeguards for pension freedoms. Today’s retirees have great flexibility and choice, but need more help to manage the risks and decisions they face. By increasing the minimum pension age, introducing a later life review of retirement options and allowing providers to offer more help to customers without giving regulated financial advice, pension savers would be better supported and their incomes more secure.
The ABI would like to see more changes to increase saving and security. Action is essential to ensure all savers can be confident that they are getting the most from their pension.
Rob Yuille, assistant director of long-term savings at the Association of British Insurers