A “gentle” review of pension freedoms is “inevitable” under a Labour government, according to Tom McPhail, director of public affairs at the Lang Cat.
Speaking on an online session hosted by Pension Playpen, McPhail provided his thoughts on how Labour may approach the topic of pensions should they win at the upcoming general election.
While he clarified his views were “quite speculative” he said he "wouldn’t be surprised to see Labour, in their first term, taking another look at pensions freedoms”.
McPhail suggested that one area in which this examination could manifest could be in the behaviour of retirees as he described this as a “real failing” of the current system.
“What we lack at the moment is a really comprehensive, authoritative analysis of the decision making processes that people are going through and how they use their pension freedoms,” he explained.
“If they are taking financial advice, we can be reasonably confident they are getting a decent outcome. But there are hundreds of thousands of people every year who access their pension pots and we have no idea whether or not they are making good decisions.
“To me that is a huge failing of the current system.”
McPhail added that he expects Labour to look at this as a problem, particularly in light of their previous opposition to the idea of pension freedoms.
He pointed out that, back in 2014 when Rachel Reeves was shadow pensions minister, Labour was “slightly discombobulated” by then chancellor George Osborne’s announcement of pension freedoms.
He pointed out that initially Labour opposed the pension reforms but it then “read the room” and saw it was a popular idea, but, despite this, it was never that enthusiastic about it.
Consequently, McPhail suggested Labour may be looking to implement a “gentle rethink” around pensions freedoms generally.
This could include an extension of guardrails and a reintroduction of some kind of minimum income in retirement.
“To me that seems a pretty inevitable direction of travel with Labour,” he added.
Auto-enrolment
McPhail also suggested Labour may seek to prioritise auto-enrolment due to the fact that some facets of the 2017 review are yet to be implemented.
Due to this delay, he stated that, should there be no progress under Rishi Sunak’s government before the election, Labour may make progress in this area.
“If the present government doesn’t make further progress, in terms of putting an implementation timeline in place, it would be reasonable to expect that a Labour government might be better enabled to do that reasonably early in the new parliament,” he said.
“I’d look out for that.”
tom.dunstan@ft.com
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