The outgoing chairman of the National Association of Pension Funds used his last opening address at the association’s annual conference to outline the breadth of change already experienced and to deliver a warning on potential further changes to the retirement industry.
Speaking Wednesday at the conference held in Manchester, England, Ruston Smith warned that suggested reforms to pension tax relief in the U.K. by the government could mean that the recent wave of changes — which he referred to as the “pensions revolution” — could become a “pensions implosion.”
Changes to the tax could “dig up and smash the foundations” that have been put in place to create lifetime savers, and would put pressure back on participants, he said.
The government is proposing a change in the current tax regime. Currently, participant contributions are tax-free and taxes are levied when assets are disbursed. The government now is proposing to tax contributions and allow tax-free disbursements.
Change should not be confused with improvement, said Mr. Smith.
Andy Harrison, CEO of Whitbread PLC, also spoke Wednesday, on what makes consumers tick. Talking about pension products, he said: “It is incredibly complicated and hard to understand: you pay up now for some uncertain benefit in the future.”
“I think the pensions industry faces this huge cultural change toward consumption today, gratification now,” added Mr. Harrison.
He concluded that the participants must be central to the pensions industry. “Where is the voice of the end user? And if you are going to have ... (a) vibrant pensions industry, you need to make sure that that voice of the consumer is heard.”
