The Government’s failure to intervene on “ridiculously high” charges in drawdown is causing savers to be cheated on a daily basis, according to members of the House of Lords.
In a debate on charges relating to drawdown products, members of the house rounded on Government spokesman Lord Freud, who insisted policymakers will continue to observe the impact of the recently implemented pension freedoms, rather than instituting a cap.
Freud was answering questions for the Government in the place of Baroness Altmann, who is unable to respond in the House as she has yet to make her maiden speech.
Pressed by Labour shadow pensions minister Lord Bradley on whether the Government would implement a charge cap, Freud said: “We are going to see how the market develops.
“It has been going for only two months, and if it looks appropriate, as I just said, we will introduce a cap on charges.”
However, the response drew censure from other members of the Lords, including Labour peer Baroness Drake, who sits on the board of The Pensions Advisory Service.
She said: “Some providers of income drawdown will charge between £150 and £200 each time a customer takes out cash, so a person with a £30,000 pot who takes out £5,000 in cash over six years will lose between £900 and £1,200.
“Will the minister challenge the industry on why the charge to access cash now is so ridiculously high?”
Labour peer Lord Hughes attacked the Government for failing to consider drawdown charges before introducing the pension freedoms.
He said: “What the minister is really saying is that no planning was done whatever and no thought whatever was given to how this matter would develop. Is he aware that, the way things are going, this will make the PPI scandal look like a children’s tea party?”
Fellow Labour peer Lord McFall added the Government’s failure to act is harming the prospects of investors, claiming savers are being ripped-off “daily.”