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Information black hole: Govt under attack on pension freedoms data

The Government is coming under increasing pressure to “get a grip” on the outcomes from pension freedoms amid a dearth of robust and consistent data on how consumers are accessing their pots.

More than six months into the reforms, figures attempting to paint a picture of the take-up of freedom and choice in pensions have started to emerge. But the data shows huge variances depending on the organisation providing the numbers. HM Revenue & Customs reports £2.7bn has been withdrawn in whole or in part since the freedoms were introduced. Yet the Association of British Insurers said this week £4.7bn had been taken, a massive £2bn difference.

The Government has yet to produce its own numbers, but has continually rebuffed attempts by Money Marketing to understand what impact pension freedoms is having on consumer behaviour.

With the numbers on pension freedoms at odds with each other, how can the industry truly understand the impact of the reforms? And without this critical information, how can the Government benchmark whether pension freedoms are helping or hurting consumers?

Pensions quagmire

Last week, HMRC reported £2.7bn had been withdrawn from pensions between April and September in partial or full withdrawals, money taken from a flexible drawdown account and purchases of a flexible annuity.

The figure excludes tax-free lump sums and the encashment of pots below £10,000. It is also based on voluntary reporting by providers.

The sum represents just under  half the total £4.7bn the ABI reports was withdrawn from pensions over the same period.

The trade body says their figure includes tax-free cash and products in drawdown pre-pension freedoms.

Towers Watson senior consultant David Robbins says the inclusion of cash lump sums could account for about £600m in terms of the difference between the two figures.

He also points out neither data set explains how much savers are taking as a proportion of their pots.

He says: “If you take £20,000 and you have a £200,000 pot, then it doesn’t matter so much, but if you only had £20,000 to begin with that’s much more significant. “So we don’t know what difference freedom has made. It’s a real quagmire.”

Hargreaves Lansdown head of pensions research Tom McPhail is concerned about figures being “all over the place” and the resulting lack of reliable information.

McPhail says: “Given we have known pension freedoms were coming since March 2014, how have we arrived in this position six months on with no real knowledge what is going on?

“There is clearly a reluctance to break cover with this data, but it’s incumbent on the industry and the media to continue to challenge the Government. We have to keep asking these questions.”

Retirement Advantage pensions technical director Andrew Tully says ideally the Government would co-ordinate with the pensions industry on collating one set of figures, which could then be used as an industry benchmark.

“Instead we have a variety of different systems measuring different bits and it’s not quite clear which you can rely on. Certainly it’s difficult to have huge confidence in any particular set of data.”

Tully believes the Government has been on the back foot in terms of data gathering around pension freedoms.

He says: “Whether that is because they didn’t want to do it, or they are not able to do it, I’m not sure, but this is less than ideal.

“It’s not hugely surprising though because various conversations went on last year about the need to co-ordinate and that didn’t seem to be taken on board.

“So none of this surprises me, but that doesn’t make it any easier for advisers or the end customer.”

Rejected FoIs

Money Marketing has submitted several freedom of information requests to both the Treasury and HMRC in a vain attempt to obtain data on pension freedoms and the role of Pension Wise.

FoI requests that have been declined include the tax take raised from pension freedoms on the grounds that the costs of answering the request would be too high.

The Treasury has complied with requests for information on what consumers plan to do following a pensions guidance session. The figures provided show more than 9,000 users of the Citizens Advice face-to-face element of the guidance service intended to visit their pension provider after an appointment, while 3,884 said that they plan to speak to an adviser.

Some 3,774 said they would visit their provider after a session with The Pensions Advisory Service, and 2,225 expressed an intention to speak to an adviser.

Yet the Treasury has not disclosed how many consumers responded, which means the numbers cannot be put into context. It also did not separate out those users who said they would take more than one course of action.

Just Retirement group external affairs and customer insight director Stephen Lowe says the need for robust data is becoming increasingly urgent.

He says: “Unless we start collecting data, we can’t see the trajectory of an aeroplane we are already flying. We will not know if it will land safely or not. One minister has told me we will know what the results of pension freedoms are in 20 years time, but that’s just not good enough. We have to collect this information, and we have to put a system in place.”

Lowe adds: “What it requires is a cross-agency response. This information is out there, but it’s not brought together in one place, under someone who has leadership but we need to do that, otherwise we are left with pockets of the market that we can’t see.

“But nobody has taken responsibility yet and the Treasury certainly hasn’t.”

Partnership corporate affairs director Jim Boyd describes the absence of clear data as “a matter of enormous concern”.

Boyd says: “It’s only if we have clear data which is recognised and able to be shared that we can interpret what is happening. If the Government can’t do this, how can you ensure people are getting the help they need?

“It’s terribly important the Government gets a grip on this. Pension Wise should be giving us some granular information. If the industry and the public don’t feel there is any quality information coming back, then all it will do is lead to a lack of confidence in the system and that’s the last thing we need.”

He argues there is a need for the Treasury to seize control of the situation and ensure data is consistent.

He says: “It’s already been over six months. If we get to a year out, and we are still unclear about what people are doing, or the data is still incomplete or insufficient, then that would be a tragedy.”

EXPERT VIEW: Iain Anderson

We are unlikely to see more on the Government’s planned trajectory for the reform of pension tax relief in the Autumn Statement. What is going on here with the lack of data relates to the politics of the broader reform project.

My sense is that from next March, we will see a lot more reporting on pension freedoms, Pension Wise and the wider way forward.

Politicians like to present a singular package. If the consistent data can be presented alongside the tax relief stuff in the Budget then it is better for the Government, as the information comes out in one piece.

This stance is certainly helped by a sense within the Government that they want to have more data before they start publishing everything.

But there will come a point when the Government has to be more forthcoming with its data. As bad as it is now, the political pressure and the external pressure in the wake of the Budget is going to be pretty hard to resist.

Iain Anderson is executive chairman at Cicero Group


Carl Lamb

Managing director

Almary Green

We don’t know anything about how all the freedoms are being used and there are some questions about the adequacy of the information already out there. Are we looking at the tip of the iceberg, and is far more money coming out than people think? Someone like Ros Altmann needs to get a grip on what is happening, but the Government seems to prefer burying its head in the sand.

Ian Thomas

Managing director

Pilot Financial Planning

I am in the camp of wanting to understand where people are using these guidance services. We really need to understand the effectiveness of those channels, which ones are most popular, how many people go on to take full advice. It would be useful to see all that, but at the moment the information just does not seem to be out there.



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£4.7bn withdrawn from pensions since April

Almost £5bn has been withdrawn from pensions since the freedoms were launched in April, according to the Association of British Insurers. Some £2.5bn has been taken out in cash lump sums, the trade body says, while £2.2bn has been paid out through income drawdown products in the first six months of the reforms. The totals […]


HMRC: More than £2.7bn withdrawn from pensions since April

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There are 4 comments at the moment, we would love to hear your opinion too.

  1. Said it before: What do those complaining about the lack of data expect they are going to *do* with the data? Decide it was actually a terrible idea, and that everyone has to pay their money back to their pension provider?

    It’s none of their business what people are doing with their pension funds. What part of “pension freedom” do they not understand? When I withdraw money from my current account no-one is collecting data on what I do with it. I hope.

    The spectacle of the technical director of Retirement Advantage, the customer affairs director of Just Retirement and the corporate affairs director of Partnership (no wonder these companies are bleeding money with so many directors) wringing their hands over the number of people choosing not to use their products, and demanding the government take action instead of thinking about what the public wants, is a deeply unedifying one.

  2. Good grief can’t you understand that the only thing the Government and the Treasury are interested in is how much extra tax they can take? All the rest is con, smoke and mirrors and flim-flam.

  3. 3 points:
    Firstly the article states that HMRC reports £2.7Bn taken out, and that this “represents just under half the figure of £4.7Bn reported by the ABI over the same period” What???
    Secondly, it states that the ABI figure includes amounts withdrawn from pre-Freedoms Drawdown contracts, so presumably their figure includes normal monthly pensions being drawn by sensible investors who are using drawdown properly to provide them with a sensible level of retirement income?
    In all of these sensationalist reports of how much has been accessed since April 6th, I have yet to see any comparison with the level of withdrawals taken in the same periods during the 2014 and 2013 tax years.
    By all means criticise the Government for not having a set of standards by which to collect data, but please at least provide some sense of balance by identifying what proportion of the amounts withdrawn could be regarded as normal retirement income provision by sensible investors. It is only if this comparison is included will we have any hope of identifying how much extra has actually been accessed as a result of pensions freedoms.
    Thirdly, identifying how much tax has been deducted at this early stage is not exactly useful to anyone, given that in cases where too much tax has been deducted under emergency codes this will be refunded over the next 12-18 months as the relevant forms and self-assessment tax returns are completed.

  4. Vested interests, closed shop whatever or wherever within industries or services sector, will always cry wolf about anything whenever either competition, or as now… pension freedoms are introduced which in turn affect their vested interests….Build a bridge and get over it as they’re here to stay….

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