MPs launch inquiry into pension freedoms
The Work and Pensions Committee has launched the inquiry to see how far the pension freedoms are achieving their objectives and whether policy changes are required.
It comes as police data revealed £43m in pension savings have been lost to scammers since the freedoms were introduced in April 2015.
The Pension Regulator recently warned that its anti-scammer ‘kitemark’ has been used fraudulently by scammers and the committee wants to hear people’s experiences to work out how to prevent losses.
Further, the committee said only 7% of pensioners drawing down savings used the free Pension Wise service to help them with the decision. This suggests that people are making their pension choices without the support available, increasing the risk they will not get the best value from their savings.
Nest, the state-backed workplace pension scheme, has expressed concerns that millions of members may be at risk of running out of money, be hit by high charges or pay additional tax as a result of not seeking the right help.
Rt Hon Frank Field MP, chair of the committee, said: “Pension freedom and choice liberated savers to choose what they wanted to do with their own money. This was welcome, but as with any radical reform it’s important to monitor its practical effects closely to ensure it is working as envisaged. In this case it is vital that adequate support ensures people are equipped to ensure they don’t make decisions they subsequently regret.
“I am particularly concerned that savers are more vulnerable than ever to unscrupulous scam artists. This policy must not become the freedom to liberate people of their savings.”
Steve Webb, director of policy at Royal London, said: “The pension freedoms have been overwhelmingly positive, with many thousands of people enjoying the opportunity to use their pension savings in a way that works for them.
“But the select committee is right to look into ways that the operation of the freedoms could be improved. Not enough people are taking advice or guidance about one of the most important financial decisions they will ever make, and there is indeed a risk of people being persuaded to hand their money over to scammers
“Consumers need to be supported to shop around for the best home for their retirement savings rather than just staying with the company they have been saving with so far. The opportunity to get things right under pension freedoms is considerable, but savers need more help and advice to make sure that they can take full advantage of those freedoms”.