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Leader: Pension freedoms – success or failure?

Natalie Holt, journalist with Money Marketing Photo by Michael Walter/Troika

Are pension freedoms failing? Judging by the £900m that has gone to Treasury coffers as a result of the reforms, and the fact this is 28 per cent up on the forecasted tax take, the Government would no doubt say pension freedoms are working very nicely, thank you.

Of course this is not the only measure on which to judge success (though it is probably the only benchmark the Government is truly interested in).

For advisers the dial has not moved that much on the issue of insistent clients, as we saw this week in the case of Portal Financial, which has been ordered to pay redress after it transferred the pension pot of a client who could not read or write.

On pensions guidance, the restructure trailed as part of the Budget would suggest this has not worked either. No one has a bad word to say about The Pensions Advisory Service and they seem to be doing a stirling job.

But as we all know, the Money Advice Service has been all but consigned to the dustbin and at certain points over the last year Citizens Advice has appeared to lurch from crisis to crisis.

Pension freedoms mean more people need advice, and we need to get to a place where as many would-be clients as possible are getting in front of advisers.

But the great white hope to boost advice – the Financial Advice Market Review – has fallen flat and, what is more, is set to be mired in consultation for years to come. As evidenced by the FCA’s £519m budget, advice is not about to get any cheaper.

The other worry is we do not know in any meaningful sense what people are doing with their  newly released pension cash. Is it flowing into buy-to-let? Being parked in cash? Ending up in dodgy unregulated investment scams? The truth is we just do not know.

Proponents of pension freedoms say the brave new world has re-energised engagement in pensions like nothing else. That may well be the case.

But the dangers, risks and challenges associated with the reforms are at once clearly definable and yet unquantifiable.

Perhaps the Government should be spending less time eyeing up the tax take and more time examining whether the freedoms are working for consumers, and helping the industry gain a deeper understanding of whether the reforms have changed the market for better or for worse.

Natalie Holt is editor of Money Marketing – follow her on Twitter here



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

  1. As you say Natalie, a success for the treasury. A success for the feckless who just want to trash the cash, have no thought for the future and will be content to live on benefits. Success for advisers, platforms and fund managers, who will continue to be on an earner which they would otherwise have missed if an annuity had been purchased.

    A failure for common sense and prudence. A failure on account of the increase in future state benefit payments. A failure for those who need certainty, simplicity, without ongoing fees, charges and reviews. A failure for tax mitigation in many cases and of course a failure in respect of the annuity providers, who may have been able to offer better rates if funds hadn’t been diverted.

  2. can’t help but agree with Harry’s comments above. Some form of change was needed in place of blanket option of an annuity, but reform that boosts short term deficit reduction, without actually dealing with the need for providing meaningful income retirement, doesn’t feel like positive reform. Time will tell I guess.

  3. In view of HMRC’s approach of applying an “emergency code” to the majority of these payouts one wonders whether the “£900 million that has gone into the Treasury coffers” will subsequently be revised downwards?

  4. I am not familiar with the details of the case against Portal Financial but I am reminded of a very close friend now sadly deceased who could neither read nor write but my could he count and he managed to leave several million to his heirs! He would have undoubtedly opted for the new pension freedoms as he was never a great fan of pension investment!

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