Chancellor of the Exchequer George Osbourne We've already seen some big changes to the pension industry in the past few years with the introduction of auto-enrolment and the new pension freedoms, allowing savers complete access to their pension pot from the age of 55 instead of being restricted to buying annuities. But following today's budget, it looks like we'll be seeing even more changes in the near future.
As part of his 'retirement revolution', Chancellor George Osborne today announced that he is to publish a green paper with the aim of getting feedback on his plan to "make pensions more like ISAs" and is "open to radical reform" of the entire pensions system.
The green paper, published today discusses how increased longevity and the fact that the provision of pensions has changed means that the government needs to reassess the entire system and ensure that the incentives are there to make sure that people save enough for a comfortable retirement.
A sound case can be made, according to the document, of retaining the current pensions tax system as it is well understood and well implemented by employers and employees. However, the Chancellor also wants to explore other ways of using the system of pensions tax to encourage people to save more for their retirement. It sets out four key principles that any pensions reform should meet:
- Transparency and simplicity: Any changes should be simple and transparent. The government believes that this will help people engage with saving for retirement more and
- Personal responsibility: Changes should allow individuals to take personal responsibility for ensuring they have adequate savings for retirement. It should encourage people to save enough during their working lives to meet their aspirations for a sufficient standard of living in retirement.
- Auto enrolment: Any changes implemented should build on the early success of automatic enrolment in encouraging new people to save more.
- Sustainable: Any changes should be sustainable. Any proposal for reform should also be in line with the government's long-term fiscal strategy.
The green paper "asks questions, invites views and takes care not to prejudge the answer". It's unclear at this stage when the results of this consultation will be published, but whatever the result, there are interesting times ahead for pensions.