The pensions industry has given a stark warning to politicians that current plans to increase the age at which people can access their retirement funds will “bake in complexity” to pension rules for decades to come.
The warning comes in a letter from the Association of British Insurers, sent to Stephen Timms, chair of the Department of Work and Pensions Select Committee.
Under current plans the age at which people can access their retirement savings will increase from 55 to 57, in line with improved longevity and planned increases to the state pension age.
However the government is also proposing that people currently savings into a pension will be ale to ‘protect’ their normal minimum pension age (NMPA).
The ABI says it is “seriously concerned” about these proposals which will mean some savers have an NMPA of 55, while others will have an NMPA of 57. It added that concerns about these proposals had not been resolved and there was an urgent need to pause these plans until a more simpler solution can be found.
In the letter the ABI said: “[These proposals] go against joint efforts by the government and industry to simplify the experience people have with their pension journey.”
It added that as the proposals stand there is a risk of widespread confusion among consumers, and it will be far harder for providers to engage and communicate with members effectively.
The ABI said the plans could also create “perverse” incentives for customers to switch pensions in order to keep an access age of 55. There are also potential clashes with other policy objectives, such as DC consolidation of small pension pots.
It added there was also the risk of scammers exploiting the situations by playing on fears that people may not be able to access their funds at the earlier age.
The ABI is proposing that the NMPA is increased across the board, with only limited protections available for certain employments, for example fire fighters. It added there is a precedent for this when the minimum pension age was raised from 50 to 55 in 2010.