Providers and others across the pensions industry need to urgently increase people’s awareness of their ‘at-retirement’ options to ensure they are aware of the implications or else there may be “losers on a grand scale”, Aegon has said.
This follows the Budget announcement in March, when chancellor George Osborne said all restrictions on pension withdrawal would be lifted by April 2015.
Speaking to FTAdviser, Kate Smith, regulatory strategy manager at Aegon, said the much lauded ‘guidance guarantee’ could stimulate increasing people’s awareness.
“We need the pension industry and guidance guarantee to work together to ensure that people receive a consistent message.
“This includes highlighting the downside of cashing in pension monies. We don’t want to put barriers in the way to people accessing this refunds pension, we just want to increase awareness so that people make decisions with their eyes open and we avoid a mis-selling scandal.
“We want to avoid there being too many losers on a grand scale. We don’t want people to look back and realise that they’ve made a rash decision. Once it’s gone it’s gone and there’s no going back.”
Ms Smith believes that some people are holding back retirement decisions until April, and some may have already made up their minds that they want to cash in their pension.
However, she warned it may be very difficult to get people to change their minds on this matter, even though it may not be the right thing.
She added that it was “important” to encourage people what this would actually mean, not only now but in 20 or 30 years time, as typically people underestimate how long they will live.
Ms Smith said: “Potentially some people will cash in all or some of their pension in April. And it’s difficult to gauge the numbers. This may be right for some but it’s unlikely to be right for the majority in the long term.”
Ms Smith’s comments follow news last week that close to three-quarters of financial advisers believe some of their clients will wholly cash out their pension when they are given the freedom to do so from next April.
According to a survey by Intelliflo 73 per cent of 227 advisers believe that being able to withdraw a full pension pot will be of interest to some of their clients, with 26 per cent stating it will be of interest to many.
Earlier today FTAdviser reported that Financial Conduct Authority director of policy David Geale told MPs the qualification standards and remuneration reforms at the heart of the Retail Distribution Review will reduce the potential for poor outcomes, as he faced a barrage of questions over pension freedoms ‘mis-selling’.
Giving evidence during a Pensions Bill committee session yesterday (11 November), Mr Geale was asked a number of times about the likely need for major redress in the future as a result of guidance not being taken or clients taking advice, but ending up in higher risk products such as drawdown.
ruth.gillbe@ft.com