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.”