The Liberal Democrats have pledged to watch the pensions industry like a hawk as it creates new products ahead of April 2015 when the new retirement freedoms will take effect.
Speaking at the LibDem conference at the weekend, pensions minister Steve Webb said it was difficult to regulate products that did not exist, but he would step in to avoid 'past horror stories' from repeating if new products could cause harm to consumers.
The industry is currently working on a host of new and innovative products to jolt the annuities market for all over 55s seeking to access their pension pot in full from next April. It was announced earlier this year that annuity purchases would no longer be the default option for pensioners retiring with defined contribution pension pots.
Webb said that to support people in making good choices there would be a legal right to free impartial guidance on their retirement options online, over the phone or face-to-face. The guidance is expected to come from independent organisations rather than scheme providers.
'We need to make sure that as the financial services industry creates new products and options to meet these new freedoms, we put the consumer front and centre of our approach,' he said.
'While it is difficult to regulate products that don't yet exist, I am clear as a Liberal Democrat that we must watch the industry like a hawk and step in if necessary to make sure we do not have a repeat of some of the past horror stories for which the pensions industry has unfortunately become all too well known.'
Webb added that there was still 'much more to do'. He also reaffirmed his commitment to 'automatic escalation', where each time an individual got a pay rise, a part of the extra cash would go into the person's pension pot.
He said: 'Having got millions of people in to workplace saving we need to get them saving more than the bare statutory minimum of 8%. I am quite attracted to the idea that when you start a job the norm is that each time you get a pay rise, a part of the extra cash goes into your pension, building up gradually to a worthwhile sum. You could opt out of this "automatic escalation" but unless you actively chose to opt out, you would gradually contribute more.'
Webb also repeated his proposal to tackle what he called the 'iniquity' of the current system of tax relief on pensions.
'If I want to put £1 into my pension it only costs me 60p - the taxpayer contributes the other 40p through higher rate tax relief. But if someone on an average wage wants to put £1 into their pension it costs then 80p, the taxpayer only contributes 20p. That cannot be right,' he added.
Webb said he wanted to 'rebalance the money so that everyone rich or poor, got help at the same rate'.
