Committee shows particular concern over pension scams
The Work and Pensions Select Committee wants evidence on whether there are gaps in the advice and guidance market and if customers are changing their behaviour after getting advice as part of its inquiry into the pension freedoms.
The committee announced today it is opening an inquiry into whether the pension freedoms are achieving their objectives and if policy changes are needed.
The inquiry will look into what people are doing with their pension pots and whether their decisions are consistent with their objectives. It also wants to know if there is adequate monitoring of people’s decisions.
This work follows an earlier inquiry by the committee shortly after the pension freedoms were introduced in 2015.
The committee wants written evidence on eight different points, several of which are related to advice.
The committee wants to know if people are taking “proportionate” advice and guidance and, if not, why not. It also wants to find out if people are changing their behaviour after getting advice or guidance.
The committee is asking if there are “persistent gaps” in the advice and guidance market and what might fill them. It also wants to know if automated advice and guidance tools are filling the gaps.
The inquiry also has a focus on scams and asks if the Government and the FCA are doing enough to prevent scamming and mis-selling. It wants to hear from scam victims about their experience.
Product providers are also part of the inquiry. The committee wants evidence on whether there is product market competition resulting in a cheaper, clearer or wider range of products for consumers. It also asks if people are switching providers when accessing their pots and if there is an adequate annuity market being sustained.
The inquiry also asks about pension dashboards and the obstacles to them being created. It also wants to know if Pension Wise is working and, if not, how it should be reformed.
It is also asking if pension freedoms are part of a “coherent retirement saving strategy” and to what extent it is undermined by other Government policies.
Committee chair Frank Field says it is important to monitor any “radical reform” that has been introduced to make sure it is working as intended.
He says: “In this case it is vital that adequate support ensures people are equipped to ensure they don’t make decisions they subsequently regret. I am particularly concerned that savers are more vulnerable than ever to unscrupulous scam artists. This policy must not become the freedom to liberate people of their savings.”
Royal London policy director and former pensions minister Steve Webb says: “Not enough people are taking advice or guidance about one of the most important financial decisions they will ever make, and there is indeed a risk of people being persuaded to hand their money over to scammers.”
Webb adds: “Consumers need to be supported to shop around for the best home for their retirement savings rather than just staying with the company they have been saving with so far.”
“There is also a concern that people are taking money out of a pension where it is growing and being invested and parking it in a low-interest cash savings account. The opportunity to get things right under pension freedoms is considerable, but savers need more help and advice to make sure that they can take full advantage of those freedoms.”
AJ Bell senior analyst Tom Selby adds: “The reforms are essentially a massive experiment of human behaviour, so the more robust analysis we have on how they are being used – and any potential policy interventions that could be necessary – the better.”
Selby adds: “On advice and guidance, the Financial Advice Market Review is in its early stages but will likely have limited impact on take-up, while demand for guidance from Pension Wise has been limited. Promoting the value of advice, as well as simplifying the information providers are required to send to customers, could help address this engagement gap.”