The Work and Pensions Committee has launched an inquiry into the pension freedoms reforms introduced in April 2015 (https://committees.parliament.uk/committee/164/work-and-pensions-committee/news/147610/work-and-pensions-committee-to-examine-impact-of-pension-freedoms-and-protecting-pension-savers/)
• The first stage of the investigation will focus on pension scams
• Three-part inquiry will then look at accessing pensions and saving for later life in 2021
Tom Selby, senior analyst at AJ Bell, comments: “Handing savers total freedom and choice over how they spend their pension pot from age 55 was always going to make them a prime target for pension scammers.
“While the Government was initially slow to grasp the magnitude of this risk, in recent years we have seen a far greater focus with pensions cold-calling banned and a nationwide advertising campaign launched by the FCA.
“It is vital that policymakers and the wider pensions industry continue to monitor scam activity and take action where possible to protect savers.
“But given fraudsters usually, by definition, operate outside of regulatory boundaries, the most effective way to protect people is to arm them with the information they need to avoid falling victim in the first place.”
Five years of pension freedom
“Since being introduced in April 2015, the pension freedoms have been the subject of a number of investigations by both politicians and regulators. This is no surprise given the seismic impact the reforms have had on the retirement choices people make.
“Savers have embraced the flexibility opened up by the reforms, with most people now staying invested while taking an income via drawdown in retirement.
“While it is impossible to make a definitive assessment about how sensible people’s retirement decisions are without knowing their personal circumstances – including income sources, health and overall wealth - average withdrawals have trended downwards over the years.
“The latest HMRC figures suggest the average per person withdrawal stood at £7,100 in the first quarter of 2020 – down from £7,300 a year earlier. Although somewhere between 300,000 and 350,000 pots are fully withdrawn each year, the vast majority of these are small pots worth less than £30,000*.
*https://www.fca.org.uk/data/retirement-income-market-data
