Speaking to New Model Adviser® as we launch our Pension Freedoms MOT series, ex-pensions minister Steve Webb has revealed the strategy behind 2014’s surprise Budget announcement.
Webb, director of policy at Royal London, said the pension freedoms ‘was like a dam breaking’ after years of pressure to reform annuities. ‘It should not have been a surprise,' he said.
But a surprise it was, sending some shares tumbling. On the day of the 2014 Budget the shares of specialist annuity providers Partnership and Just Retirement fell 56% and 42% respectively.
But Webb said ‘it had to be a surprise’ because it was ‘hugely market sensitive’ and would have a big impact on providers.
Another criticism could be the fact regulators only had a year to create the rules governing the freedoms before it was implemented. Webb said waiting any longer would have been difficult. He said 12 months after the March 2014 announcement there was 'a tidal wave’ of pent up pensions money, waiting for the freedoms to come into force in April 2015. Waiting until 2016 would have ‘trashed’ the annuity market for two years, he said.
Check-out our video, also featuring a certain make of Italian super-car!
George Osborne’s failure to build expert consensus before his shock announcement of the freedoms means the policy is a job half done, former shadow chancellor Ed Balls told advisers at our annual conference in January.
Balls said policies that build ‘consensus’ do so because they become embedded in the public psyche or because independent experts have come together and support an idea.
In the case of the pension freedoms, Balls pointed out there was no prior consultation.
‘The jury is still out,’ he said. ‘It would be interesting to see if there was a mis-selling scandal what the consequences would be.
‘Enough people have already decided being able to make choices about their future is not something they want taken away. The question is how we get the reforms right and how we get the regulation right.’