Influential Work and Pensions Committee launches inquiry focused on risk of savers being scammed post-freedoms
Further pressure on Government to bring forward proposed clampdown on fraudsters, including cold-calling ban
Committee also seeks evidence on use of advice and guidance, the extent to which market competition is working for savers, and the retirement choices people are making post-freedoms
Tom Selby, senior analyst at AJ Bell, comments:
“The Committee’s decision to launch an inquiry into the freedoms will hopefully put a rocket up officials dilly dallying over the implementation of vital protections from scammers, including a proposed ban on cold-calling. The Government’s commitment to introduce the reforms at the earliest opportunity simply isn’t good enough – hopefully the Committee can hold policymakers’ feet to the fire and accelerate the introduction of these measures.
“It is sensible for the Committee to consider the broader impact the pension freedoms have had on savers and the retirement income market in general. The reforms are essentially a massive experiment of human behaviour, so the more robust analysis we have on how they are being used – and any potential policy interventions that could be necessary – the better.
“The evidence we have seen so far suggests the pension freedoms are broadly working well for consumers. The drawdown market is hugely competitive, with providers competing hard for new business, driven by the knowledge savers could switch providers at any time if they feel they aren’t getting value for money.
“While FCA data suggests many savers are taking their entire pension pot as cash, it’s worth noting the vast majority of these are small pots. While information on the overall sustainability of withdrawals is scarce, nothing we have seen so far points to retirees being hugely irresponsible and splurging their hard-earned savings on fast cars and luxury holidays.
“On advice and guidance, the Financial Advice Market Review is in its early stages but will likely have limited impact on take-up, while demand for guidance form Pension Wise has been limited.
“Promoting the value of advice, as well as simplifying the information providers are required to send to customers, could help address this engagement gap.”