Make savers wait longer for pension cash, urge MPs

Pensioners need more protection, says committee

Updated: 
Pink piggy bank and hand with hammer

Concerned that pensioners will blow their pension pot too quickly, the Commons Work and Pensions Committee is calling for savers to be blocked from accessing their cash until they reach the age of 57 or 60.

Under reforms to pension rules coming into effect next month, savers are allowed to cash in all or part of their pension pots from the age of 55.

However, the MPs believe that, for pensioners' own good, this should be increased to just five years before pension age. Men, therefore, would currently have to wait until age 60, and women to 57, rising to 62 for both sexes in ten years' time.

"Allowing people to take advantage of the new pension flexibilities 10 years before they get their State Pension could create unrealistic expectations about the age at which they can afford to stop working," said Dame Anne Begg, the Labour chairman of the committee, in a report presented to ministers.

"Our view is that, given the significant tax relief provided for pensions, increased longevity, and the importance of ensuring that people do not underestimate the income they need in retirement, the age at which people should be able to access their pension pots should be changed to five years before the State Pension age, except where there are ill health grounds."

The committee is concerned that savers don't necessarily understand how big a pension pot they're going to need - and how long it may have to last them.

The report also warns of the risks pensioners run from scammers - highlighted by pension experts yesterday - and even from pension providers themselves.

"The pensions industry has not always done enough in the past to help savers make the right decisions," says Dame Anne.

"We are very pleased that the FCA has finally been persuaded to place a duty on pension companies to ask savers key questions to try to ensure they understand the implications of decisions on how they use their pension pot."

But, says the report, more still needs to be done to protect savers, including the creation of a new independent pension commission that should assess whether there are weaknesses and loopholes in the current rules.

The Institute and Faculty of Actuaries (IFoA) has expressed concern in the past about whether savers will be given enough support, and welcomes the report's findings.

"A review of the age at which pension savings can be accessed, which is currently 55 and rising to 57 by 2028, would be welcomed as it could go some way to alleviating some of the risk that individuals may run out of money in retirement," says president Nick Salter.

"The IFoA has previously stated concerns regarding the promised guidance individuals are due to receive in the run up to retirement and it is important that this guidance is fit for purpose and helps individuals plan appropriately for their retirement needs."

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