The Times reports that MPs are to review whether the ‘pension freedom’ changes of two years ago are working in practice, in particular over concern that they are exposing vulnerable people to fraud.
Frank Field, chairman of the committee, said that “a new breed of pension crooks” had grown up to try to part people from their retirement savings. The committee will also investigate wider concerns that too many people may be risking poverty in old age because of the temptation to splurge.
“Pension freedom and choice liberated savers to choose what they wanted to do with their own money,” Mr Field said. “This was welcome, but as with any radical reform it is important to monitor its practical effects closely to ensure it is working as envisaged. In this case, it is vital that adequate support ensures people are equipped to ensure they don’t make decisions they subsequently regret.”
George Osborne stunned the industry when, as chancellor, he announced the changes, overturning the decades-old convention that savers in defined-contribution pensions funds qualified for tax perks today usually to buy an annuity tomorrow and so ensure that they did not become a burden on taxpayers in old age.
A million pension pots have been accessed since the reforms went live and £11.8 billion withdrawn, according to figures from the Financial Conduct Authority. Nevertheless, it is not clear that the practice is as common as the FCA suggested: another 5.6 million pots in the 55-65 age bracket remained untouched.
One big concern is that people are emptying their pension pots only to invest the money in other assets, surrendering the tax advantages of pension saving.
“This behaviour is totally irrational and highlights the lack of trust and ownership that people feel towards pension saving,” Jon Hatchett, of Hymans Robertson, the actuaries, said.
Thirty per cent of people accessing their pots were doing so without taking advice, the FCA found. Mr Field quoted police data which suggested that more than £43 million of people’s retirement savings had been lost to fraud since the policy was announced.
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