The Chancellor George Osborne is taking “a big bet” that people can be trusted with their own money in “one of the great financial gambles of our time”, Channel 4’s flagship investigation programme Dispatches warns.
Aired last night, the episode titled ’How to blow you pension’ focussed on savers’ plans for splashing their cash on expensive holidays, the risk of pensioners running out of money too soon and the proliferation of pension scams, including investments in foreign car parks and self storage units.
In one case, a firm tried to convince a saver to invest their pension in supposedly low-risk parking bays in the Middle East and a forest in Central America with projected returns of 197 per cent.
In another, a saver was told he would get a lump sum and an investment in self storage units Store First if he handed over his entire pension savings. But the lump sum payment was delayed by 11 months and he had not received any return on his promised investment. Store First confirmed it has sold units to a pension scheme which the individual “appeared” to be a member of.
The programme also quoted Hymans Robertson research that says the Government has massively underestimated how much will be withdrawn from pensions after April when the freedoms come in.
Presenter Michael Buerk also took pensions minister Steve Webb to task over one “big” unnamed pension provider’s welcome pack which he said stated members’ savings would automatically be used to buy an annuity from the provider unless the individual told them otherwise.
Webb replied: “That’s quite exceptional for a policy to default into annuities. The norm is that the regulator, the FCA, is contacting the companies now and working out simple, standardised information they will have to give to people.
“Will it all be done by April? No, but you could put this off forever until you’d got it perfect and you’d never do it.”
The pensions minister said there was a “diversity” in the industry between “those firms who get it and realise their reputation is so tarnished they’re shooting themselves in the foot” and “a minority still in the old ways of thinking”.
He says: “There are still too many people thinking we can just do things quietly, no one will notice and that’ll keep our customers where we want them.”