The Government is “looking in the wrong place” for potential consumer detriment resulting from the Budget pension reforms, according to providers.
Last month, pensions minister Steve Webb said he will watch the pensions industry “like a hawk” as it develops new retirement income products from next April.
Speaking at the Personal Finance Society in Birmingham annual conference yesterday, Prudential distribution executive director John Warburton said the Government is concerned about product development from providers, and potentially unsuitable advice from regulated advisers.
But he said: “I think the Government is looking in the wrong place. The real risk is in the unregulated sector.
“It would be naive to think unregulated firms are not going to recognise there is a lot of money coming into the market, and there will be all sorts of promotions and propositions that will seek to seduce customers with offers that lead to detriment.”
Royal London chief executive Phil Loney said consumer inertia is a much bigger risk than product development.
He said: “I’m a lot less concerned about toxic products and I wish politicians would be more careful before using that kind of language.
“I’m much more concerned about the inertia of customers at the point of retirement – that was a big problem with people sleep walking into uncompetitive annuities, and there is nothing in the Budget reforms to address that issue.”
Loney also suggested providers may develop products in the run up to April which pay out an income for those who live beyond average life expectancy.
He said: “The products we’ve got today are going to be the main building blocks of the products of the future.
“One possible exception is when I look at the US market, there may be role for some kind of longevity long-stop insurance. So you pay a premium at the point of retirement, and know that if you live beyond average life expectancy you will be paid a regular income. That would allow you to run your drawdown fund down within a particular time period.”