Industry figures and opposition politicians have condemned the lack of clarity from the UK government over fast-approaching reforms to the defined contribution (DC) at-retirement model.
Reforms are set to go into effect in April 2015, just over a year after they were announced as part of chancellor George Osborne’s 2014 Budget.
The ‘Freedom and Choice’ proposals, which removed the need for compulsory annuitisation, were welcomed by the National Association of Pension Funds (NAPF) and unchallenged by the opposition party.
However, pressure for more detail is now mounting.
Ruston Smith, chairman at the NAPF, said while there was no denying that the reforms were an “exciting and compelling” proposition for savers, the industry was beside itself as the deadline approached.
“April is not far away,” he told delegates at this year’s NAPF Annual Conference in Liverpool.
“The problem is, we do not know enough about the detail. This lack of detail and lack of clarity is severely limiting our opportunity to get things right for members – and it is increasing the risk of failure.”
He said, with 4.2m savers eligible to take advantage of the reforms come April, products and legislation were still unprepared.
The UK’s DC market has long supported the insurance annuity business, but concerns have grown over the value for money offered by insurers.
Savers are now expected to look for more income-drawdown products, or to withdraw their DC savings entirely as cash.
“These people will expect these products to work and expect us to help them make the right choice,” Smith said.
“The government has set high expectations for the industry to respond positively and innovatively. But it is closing down the time we have to make this a real success.
“I say to the government, help us to give freedom and choice and not fear and confusion. Give us the clarity we need to make this a success.”
Speaking later at the conference, Labour MP Gregg McClymont, the opposition’s spokesman on pensions, said while his party understood it was “politically difficult” to speak out against the reforms, the party did in principle support greater freedom.
However, his personal misgivings over the reforms were that it did not fix the main criticism placed on insurers or the UK annuity market.
“There are good political reasons for [the reforms],” he said. “It is possible to work with [the government] on the reforms, while defending pensions as a concept.”
McClymont said that, while the annuities market did need reform, the criticisms were based on DC savers never seeking out the right arrangement.
He said he failed to understand how giving DC savers more choice was going to solve the situation.