Labour's new nanny state drive on private pensions: Fears plan for 'incomes for life' will leave people 'locked in' to deals they don't want

Fears have been raised that a Labour drive for 'default' private pensions will leave people locked into deals they do not want.Pensions minister Torsten Bell has unveiled proposals for 'guided retirements', requiring providers to put people on to annuity-style deals unless they actively opt out.The Government insists the arrangements will give certainty about getting an income to last the rest of pensioners' lives, instead of relying on pots that can be run down.However, experts have raised concerns that Labour is undermining pensions freedoms reforms brought in under the Tory-Lib Dem coalition.Steve Webb, This Is Money's Agony Uncle and a partner at consultancy LCP, pointed out that most people do not currently choose annuities, and would not be able to change their mind later. The Government said the new system for around 17million people would build on auto-enrollment, which means most private sector workers contribute to funds unless they opt out. Ministers argued that Defined Contribution (DC) schemes often leave people entering retirement with pots that need to be managed rather than what they called 'genuine' pensions. Pensions minister Torsten Bell has unveiled proposals for 'guided retirements', requiring providers to put people on to annuity-style deals unless they actively opt outThey said in 2025-26 some 46 per cent of first-time pension pot accesses emptied the funds entirely. 'Guided Retirement will bring back pensions that pay an income, often inflation protected, for the entirety of your retirement without the need for complex financial decisions,' the announcement said.'Guided Retirement will require pension schemes to provide a default pension for savers approaching retirement.'So-called Retirement Collective Pension Schemes (RCPS) will aim to pool risk to help guaranteed incomes keep up with the cost of living. The Government stressed that people would remain 'free to choose' but could avoid 'complex decisions' by going with the default option.Pensions minister Torsten Bell said: 'Private sector workers deserve a much better deal when it comes to pensions. They are doing the right thing and saving for retirement, but when they get there too many are left without a genuine pension.'We are resurrecting proper pensions for private sector workers, guaranteeing them the option of an income that lasts throughout retirement and in many cases protection against the rising cost of living - things public sector workers take for granted.'We are going to give pensions back to the people who are working hard and saving for their retirement.'However, Sir Steve - a former Lib Dem pensions minister - told the Daily Mail: 'I guess my big problem with that is that we know lots of people want to front load their spending in retirement. 'They don't actually want to keep lots of money back for when they are 87.'They want to spend it when they are 63. They want to go on holiday, they want to replace the car, they want to do the kitchen or give the kids some money for a wedding or house deposit.'If you have locked into one of these things, after about a year you cannot get out of it.'That is the big worry. If you want an income for life you can get one now, you go to an insurance company and they will sell you an annuity.'But people don't. People don't by and large buy annuities at retirement. If income for life is so great why aren't people choosing it anyway?' Sir Steve said the proposals could disadvantage people who did not initially engage with their pensions, but realised later they had taken the wrong course. 'Basically the current government disapproves of pension freedom. They didn't like it when it happened, they would abolish it if they could but they know it is popular,' he said. 'They sort of feel morally somehow you've built up this pot, it is good for you to have an income for life, that is what it is for, that's what pensions are... we don't want all this people taking chunks when they fancy it business.'He added: 'Many people will have a good level of secure income – especially in the case of a couple with two full state pensions and some other pension income – and may prefer the flexibility to take their DC pot in chunks as needed, rather than spread thinly through the decades of retirement.'This is likely to be true of homeowners in particular, who show a preference for front-loading their spending to earlier in retirement.Jon Greer, head of retirement policy at wealth manager Quilter, said: 'Default retirement solutions can help, particularly for those who do not want to navigate complex decisions themselves.'But they should be a safety net rather than a straitjacket.'People must retain the flexibility to choose a different approach and access personalised advice where appropriate.'Kirsty Ross, product and proposition director for People's Pension, said: 'Retirement default journeys should include clear consideration of members whose circumstances may warrant a more tailored approach, including those with particular health conditions, dependants, or wider financial needs.'