David Hare, President of the Institute and Faculty of Actuaries (IFoA) comments on the changes announced to pensions in the 2014 Budget.
“Over the past 4 years we have seen significant changes to pensions. In today’s Budget the Chancellor announced changes to defined contribution (DC) pensions that will revolutionise later life income for people in the UK. In effect these changes mean that anyone with a DC pension will be able to choose the shape, amount and timing of their income in their retirement. The transitional arrangements that take effect from next week (27th March) are useful immediate steps to creating this new flexible retirement landscape, and will impact those people holding a number of small pension pots.
“However, it is important that the same opportunities apply for members of any pension scheme, whether defined benefit (DB) or defined contribution. Undertaking this will not be easy. There are a number of issues that need to be addressed by any proposal to extend the flexibility to those in DB, including making sure that DB members realise what they could be giving up (e.g. Longevity protection) in exchange for increased flexibility.
“The changes will empower individuals, allowing them to take control of their own financial futures. This is in step with the change in risk responsibility to individuals that DC brings. However taking charge of your financial future can be a bewildering journey for some people and we were therefore pleased to see that the Government recognises this and is committed to making sure those with a DC pension are offered the chance of impartial face-to-face guidance on their choices at the point of retirement.”
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