Independent trustee and governance services provider, confirmed their broad support for the relaxations that the Government has proposed today, although they still believe there are some concerns. 

Richard Butcher, Managing Director at PTL, commented: “The principle of allowing people to take full cash at retirement continues to concern us. While we agree that it should drive innovation in payment phase product design, the policy has been designed without the benefit of any evidence on how people will react. There is a risk that some will spend their money too quickly and others too slowly. Neither outcome is good for them or the exchequer.

“We’re glad to see that schemes will not be obliged to provide this flexibility – although they can choose to do so. This means that schemes will not have to act like pseudo bank accounts, which, of course, they’re not geared up for. On the flip side, however, members will be able to transfer out to gain the new flexibilities. This has a number of implications: (a) the employment management/pension provision link will be broken which could, in turn, lead employers to reduce their contributions, (b) employees will have to opt out of the scheme in order to transfer. This could result in them leaving generous pension schemes and so prejudice their chance of maximising their pension pot and (c) having opted out, presumably their employer will have to auto enrol them again – that’s quite a headache for both the employer and the employee.”

Butcher added: “We’re also glad to see that the Government has taken the relatively easy route to stopping abuse of the system by reducing the personal allowance once a member has started to take taxable income. That said, the reduced allowance will have an impact on a significant number of people, so this isn’t freedom and choice for them. Also, as the allowance is administered through personal tax returns, this makes that annual event more complicated for the member. “Finally, in relation to the Guidance Guarantee, again we’re broadly supportive but (a) it’s too late – by the time a member gets to retirement they could have made some very significant mistakes on contributions and investments – and (b) it’s not true to say this is free to members. If an FCA levy is imposed to cover its costs, providers will have to increase charges. This means that all of us will be paying for the guidance guarantee whether we use it or not.”