In January 2022, the Work and Pensions Committee (WPC) published its second report in its series on the impact of pensions freedoms, concentrating on the issues people face when accessing their benefits.
The report calls on the Government and regulators to play a more active role in supporting savers to help them make better decisions about their money and makes the following recommendations:
The committee wants more people to get help when deciding how to take their pension savings. It suggests the Government sets a goal of at least 60% of people to be using Pension Wise or receiving paid-for advice when accessing their pension pots for the first time.
It wants the Government to run two trials for automatic Pension Wise appointments: one at age 50 before an individual can access their pension savings and one when they access their pension for the first time.
The Pensions Advice Allowance, which allows £500 to be withdrawn from a pension up to three times in different tax years to pay for advice, should be overhauled with the annual limit removed. To increase take-up, advisers should be encouraged to signpost its use.
The committee considered a proposal to allow de-coupling of tax-free cash, where someone could take their 25% cash without designating what to do with the rest of their pension pot. It recommended that regulators scope the research and testing needed to investigate this proposal further.
The committee warned the Government not to add to pension complexity. However, with three annual allowances and seven sets of transitional protections, not to mention the complicated protection regime that will be introduced to accompany the increase in the NMPA (see our NMPA article for more information), it does not seem feasible that this will change any time soon.