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Aegon warns of ‘abuse’ risk from new pension withdrawal option

Chancellor George Osborne’s plans to introduce a new lump sum pension withdrawal option puts savers at risk of “abuse” by unscrupulous organisations, Aegon claims.

Earlier today the Chancellor confirmed the Government will press ahead with reforms to allow people to make multiple withdrawals from their pension pot without having to move into drawdown or buy an annuity.

Aegon says that unlike drawdown arrangements, payments made as uncrystallised funds pension lump sums will not be regulated.

Aegon regulatory strategy manager Kate Smith says: “This new income option is potentially open to abuse by unscrupulous organisations encouraging people to take their money out of a preferential tax environment and promising to invest cash on savers behalf.”

Smith also accuses the Government of misleading savers by comparing pensions to bank accounts.

TUC general secretary Frances O’Grady agrees. She says: “Re-announcing his plans to allow the over-55s to dip into their pension pots does not make George Osborne’s hastily cobbled-together policy any less rash.

“The suggestion that savers could treat their pension savings as a bank account is irresponsible.”

Aurora Financial Services director Daren O’Brien says: “Providers are worried they may be held liable for advice when they haven’t given any.

“Regulators do seem to give retrospective advice – they seem to think ‘you should have known this 20 years ago because we know it now’. I think there will be an issue with people taking their lump sums and having very small drawdown pots without taking advice.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Chris Harrington 14th October 2014 at 2:17 pm

    I disagree. We finally have a period of positive changes to the rules regarding pensions which truly encourage retirement saving and provide plenty of planning opportunities and yet still people criticise. No set of rules will be 100% perfect but these changes are a vast improvement to the archaic set we had before. Good quality advice will assist clients in making the right decisions and this should surely be good for all

  2. Totally agree with Chris above !

    The only thing I would add to this is; isn’t it about time the treasury (G Osborne) and the regulator started to promote the benefits of getting good sound regulated “independent” advice, and also the protection this comes with ?

    Not some half arsed guidance from MAS and the likes ?

  3. This will be the biggest car crash in a long time, imo. what about all those who decide not to take advice and end up in poverty in their old age through their own poor choices?! who will pick up the tab for the extra demands placed on the welfare system? future govts will be under pressure not to roll back these changes while an ever increasing number of pensioners realise they are unable to finance their old age.

  4. It seems to me that IFAs are running scared now. They have had the monopoly for so long and see the end of their exploitation of joe public. At the moment people are saving for their pension and getting a really poor return so if they choose to take money out to either spend or save through another method that is surely up to them. It is no more misleading that it is today when people think they are getting a tidy pension at retirement but end up with a paltry sum once IFA charges and insurance proividers take their cut. If people really value advisers advice they will pay for it but at least will have options rather than forced door the road when they have to take what they get. Outwith the adviser population I think these changes are being well received yet every day we read articles from someone in the financial sector criticising the changes. The games maybe up and they are running scared……….

  5. @Disgruntled you have obviously had a poor experience (which is a real shame) but do try to be sensible and not tar all advisers with the same brush.

    “Running scared?”, hardly, we will be adequately employed dealing with those who can afford/need professional advice. (I sense you have not had the experience of professional advice)

    We deal with engaged clients who fully understand what they are being advised to do (unlike I suspect your good self)

  6. @ Disgruntled – please note that most of the conventional investment options available to investors outside of a pension wrapper are equally available through certain pension wrappers. To say that people are “getting a really poor return” from pensions and, so, they should have the opportunity to “take money out to…save through another method” is demonstrating a lack of understanding, which ironically might be alleviated through dealing with a good adviser!

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