Hargreaves Lansdown, the Bristol-based investment provider and Financial Planning firm, says Chancellor George Osborne should use his autumn statement on Thursday to begin to tackle systemic failures in converting pension pots into retirement income.
The Chancellor's Autumn Statement is due to take place on Thursday morning. In it the Chancellor is expected to announce a number of measures including reducing "green" taxes on energy bills to help consumers struggling with gas and electricity costs and possibly to announce new tax allowances for married couples and those in civil partnerships.
Hargreaves Lansdown says, however, that the Chancellor should use the opportunity to announce a sweeping review of how pension pots are converted to retirement income. It wants a comprehensive review of how pension pots are converted into retirement income.
Tom McPhail, Hargreaves Lansdown pensions research head, said: "Urgent work still needs to done to address the system failures in converting pension pots into a retirement income. Industry and government initiatives in the New Year should help to address this problem."
Hargeaves is, however, expecting few new changes to pensions from the Chancellor. Changes already announced mean the annual allowance is being reduced to £40,000 (from £50,000) in April 2014 while the Lifetime Allowance will drop to £1.25 million (from £1.5 million). Hargreaves says that for someone buying a joint life inflation linked annuity at the age of 65, at standard annuity rates a pension fund of £1.25 million equates to an annual income of around £38,625 a year.
He added: "Any further changes to tax relief rates or tax free lump sum entitlements this week would be almost as unexpected as they would be unwelcome. The Treasury appears to have listened to industry calls for a period of stability for pensions policy and to recognise the importance of a successful launch for the DWP's auto-enrolment programme."
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In other areas which the Chancellor may review, Hargreaves says that the current Personal Allowance of £9,440 is scheduled to increase to £10,000 in April 2014 and an increase to £10,500, urged by the Liberal Democrats, is not out of the question. If this went ahead it would also mean a pensioner couple could potentially enjoy a joint retirement income of £21,000 a year without having to pay any income tax.
Some pundits have predicted a new life-time saving cap on Isas but Hargreaves believes this is "unlikely" as it would raise relatively little revenue for the Treasury, it would be bureaucratic to administer and would send a very negative message about the importance of long term savings.
One area where Hargreaves is optimistic in terms of Treasury changes is that parents may be allowed to shift existing Child Trust Fund savings into a Junior Isa. This would simplify administration for parents and give their children access to the most competitive terms currently available on the market, says Hargreaves.
• Don't miss Financial Planner's extensive coverage of the Autumn Statement on Thursday morning, including live Tweets of the key changes and what they mean for Financial Planners and wealth managers. The Autumn Statement is expected to be presented by the Chancellor to the Commons at 11.15 am. The speech is expected to last between 40 and 60 minutes.