Up to 400,000 people are poised to withdraw in excess of £5bn out of their pensions in the weeks following the introduction of the pension freedoms in April, Hargreaves Lansdown is predicting.
It says over-55s keen to access their pensions will lead to a “market surge” of more than £5bn which will mainly be spent, with some reinvested in banks, Isas and property.
The decline in sales of annuities will eventually mean the market is at between 25 and 50 per cent, the firm says.
It also warns fraud “is going to change” and may not be picked up by statistics and that demand for transfers from defined benefit to defined contribution schemes will limit the resources of the advice industry.
It will become easier for unscrupulous firms to target customers within the law and will not longer have to go to the trouble of setting up fake schemes, Hargreaves warns.
It says: “They will be able to target the over 55s and persuade them (quite legitimately) to take money out of their pension to reinvest in some attractive sounding scheme such as an overseas property development. These schemes will be unregulated, which means if they fail to meet investors’ expectations, there will be no regulatory intervention and no compensation.”
The firm adds that the next Government will find it difficult to track savers’ behaviour.
It says: “The Treasury has yet to set in place any measures to track investor behaviour or the flow of money through the pensions system. When challenged on this, the Treasury stated that it would use HMRC tax receipts to monitor outcomes.
“However this is a like trying to gauge your bank account balance by counting the number of Amazon parcels being delivered to your front door; it might give you a rough indication but it is hardly robust.”