The system of a fully flexible pensions world can be made to work but the challenge is constructing an environment where individuals have the ability to make sensible decisions, at a sensible time, for sensible reasons, independent pensions and investment expert Broadstone has said.
Technical director David Brooks said “the recent comments from the Fabian Society have been the first loud dissenting voice to the pension flexibilities announced by the government”.
“With investments and financial issues decisions will not always be right and some people will have poor outcomes,” Brooks said.
“It is possible that many pensioners, by nature risk averse may be too cautious in their spending and investment decisions depriving themselves of a lifestyle they can afford. However, a system designed to avoid the few bad decisions rather than create a space for a majority of good decisions seems a pessimistic way to construct a pensions system.
“Pensions are complicated, and the new flexibilities do little to change this, that is why the call should be for a massive increase in financial literacy and training from the schools up into the workplace. The government have created this system and so should be investing in an accessible education campaign to give individuals the tools they need to make the right decisions for their families.”
This week the Fabian Society said Labour must reverse the pensions freedoms announced in Chancellor George Osborne’s Budget to avoid the role of pensions being ‘swept away forever’.
Fabian Society general secretary Andrew Harrop said the “revolutionary policy” unleashed by Osborne in March would leave retirements “permanently diminished”.
He said DC pensions would become mere savings vehicles, and more products were needed to help people turn their pots into long-term income.
“Before now politicians have always seen DC pensions as part of a strategic framework for retirement incomes, based on long-term policy objectives such as helping everyone to avoid poverty in retirement and replace a reasonable share of their previous earnings.
“This philosophy still informs the accumulation of pensions, as demonstrated by the current implementation of auto-enrolment and compulsory employer contributions. But now, with the Osborne reforms, the state is saying it has no view as to whether people should use their pension pot for its intended purpose of providing income in retirement.”
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