The British Parliament’s Work & Pensions Committee has launched an inquiry into whether the pension freedom and choice reforms enacted in 2015 are achieving their objectives, and if policy changes are needed.
In April 2015, tax rules changes, known as the “pension freedoms,” were launched to give Britons greater access to their pensions by taxing the withdrawal of pension income at marginal rates, rather than the previous 55% rate. The changes also gave participants access to free and impartial retirement planning guidance through a program called Pension Wise.
The committee said that one of its major concerns about the new freedoms is the potential for fraud to be committed against people who are considering accessing or moving their pension pots. It cited police data showing that more than £43 million ($58 million) in retirement savings have been lost to fraud since the policy change was announced.
“It is vital that adequate support ensures people are equipped to ensure they don’t make decisions they subsequently regret,” said Frank Field, MP and chair of the committee. “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.”
The committee said it is also concerned that people are not making educated decisions about accessing their pension pots, citing research that shows that only 7% of people aged 55 and older who are planning to retire in the next two years have used the Pension Wise guidance service.
The committee said it wants to hear from people about their experiences with scammers, as well as any suggestions as to what might be done to prevent others from getting scammed. It is calling for written evidence by Oct. 23. Some of the questions it is asking the public include:
- What are people doing with their pension pots and are those decisions consistent with their objectives? Is there adequate monitoring of the decisions being made?
- Are the government and Financial Conduct Authority taking adequate steps to prevent scamming and mis-selling?
- Is there evidence of product market competition resulting in cheaper, clearer, or wider products for consumers? Are people switching from their pension provider in accessing their pots? Is an adequate annuity market being sustained?
- Is Pension Wise working? If not, how should it be reformed?
- Are there persistent gaps in the advice and guidance market, and what might fill them? Is automated advice and guidance filling gaps as expected?
Tags: British Parliament Work & Pensions Committee, Pension, Pension Reform, UK