New minister's outlook on pension issues

Ros Altmann is one of the country's best-known commentators on pensions having campaigned on a range of issues on behalf of consumers and savers for more than a decade.

She is now in a position to put her own stamp on pension policy, having just been appointed pensions minister. We outline what we might expect from Ms Altmann, based on her previous views.

Pension freedoms

Ms Altmann is unlikely to make changes to the revolutionary pension freedoms which were introduced in April, having described them as "great news". However, she is likely to be outspoken about companies which do not help customers benefit from the changes.

Fair and clear charges

In recent months, she has spoken on forcing pension companies to publish in "pounds and pence" the amount they charge savers, to end the culture of "rip-off fees". She said: "Many people are being ripped off by pension charges. The terms are unfair, the charges are too high and too often they don't know how much they are paying."

"It's vital that ordinary savers have protection from rip-off charges and from unusual practices."

Drawdown charge cap

Earlier this year, Ms Altmann said she "fully agreed" it was important to cap fees on drawdown products, to avoid customers being ripped off.

Scrapping the lifetime allowance and tax relief

Ms Altmann was a sharp critic of the coalition's decision to cut the lifetime allowance, which governs how much can be saved into a pension and benefit from tax relief, from £1.25m to £1m from 2016. She said lowering the LTA added "more complexity and penalises investment success - both are bad for pensions". She would like to see the LTA abolished for defined contribution schemes, but retained for defined benefit.

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Support for annuity cash-ins

Ms Altmann strongly supports extending freedoms to pensioners by giving them the option to sell their annuities on a newly created second-hand market. However she has added that "careful regulatory oversight of the second-hand annuity market" would be needed "perhaps with controls on charges and making sure people get proper independent advice before trading in their annuity.

The previous government suggested the official Pension Wise guidance service could be extended to offer help and information with the decision, and Ms Altmann said advice and regulatory protection were "really needed".

Annuity mis-selling

The new pensions minister has said that the mis-selling uncovered by Financial Conduct Authority over the past few years demands "urgent action". The FCA's Retirement Income Market and Annuities reviews uncovered clear evidence of mis-selling of retirement income products and "those findings clearly indicated the need for customer protection," she said.

Getting young people into pensions

Young people should not be pushed into saving for retirement, Ms Altmann says, but should instead prioritise paying off their debts. She has suggested that employers' contributions into a workplace pension could be used to repay student loans for younger workers, or locked into a pension. "This would mean savings will fit far better with people's lives and is likely to lead to far fewer opt-outs and far more people saving and getting used to the idea of putting money away for the future."

Backing for financial advice

Ms Altmann has said that paying for financial advice can help people save money. "Don't think that using an online information and broking service will mean you don't pay anything," she said earlier this year. "If you buy a product, you may well end up paying quite a bit in commission - indeed even more than if you used an adviser, so don't be put off just by having to pay a fee. Think carefully about getting the best chance to use your pension wisely."

Ban on hidden commission

She has campaigned for commissions taken by brokers for execution-only sales to be much better explained. "At the moment, most people do not realise that buying an annuity direct from their pension company still costs them money as the provider deducts commission (around 1.5 per cent of their fund) when they sell you an annuity," she said. "The whole issue of hidden commissions that customers pay, which can cost more than paying an upfront advice fee, needs to be explained."

Pensioner benefits

Ms Altmann has said that a government that ceased paying pensioner benefits such as winter fuel payments or free TV licences would be making the equivalent of a £10 a week cut in the state pension. "I do not believe that is right or fair," she said.

However, she has said policy makers should consider rolling all the add-on pensioners benefits into the state pension. This would make them taxable, "but people could spend the money as they wished".

Cashing in final salary

Currently, individuals who plan to cash in their defined benefit or final salary pension to take advantage of the new freedoms are required to obtain independent financial advice if their transfer value of their pot is £30,000 or more. Ms Altmann believes this threshold is too high and has argued that the safeguard should apply from £10,000 to better protect savers.

The end of pensions

Pensions should be radically revamped to make them less "frightening", she has said, arguing that people associate the word with scandals and disappointments. Instead, she has suggested they might be rebranded as "lifetime savings accounts" that people can dip into throughout their lives. She has urged the government to consider changing the design of pensions, so as to encourage or require employers to contribute to other forms of saving for their staff.

Long-term care

The dearth of new measures in the Budget to "help or encourage or incentivise" people to put money aside for funding long-term care needs was a cause of disappointment. "Families are not prepared for care, nor is the government, yet there is a crisis looming which could eat up the resources of many families who might have been able to put some funds away if they had known about it - and could also bankrupt the NHS," she said. "The next government will have to get to grips with this crisis urgently. Time is running out."

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