Pension freedoms inquiry launched
MPs are to look at whether guidance and advice following the pension changes in April are adequately supporting consumers.
Labour MP Frank Field, the chairman of the work and pensions select committee which has launched the inquiry, said: “Many constituents were ripped off in the process of putting their earnings into pension savings. We have a duty to ensure they are not ripped off again if they wish to take their money out and spend some lump sums.”
In June, the chancellor expressed concern that some providers were not doing their part to make the freedoms available to customers, and said the government would look at options to address “excessive” early exit penalties and at implementing a cap on charges.
The committee has called for written evidence submissions on key areas effecting how people approach advice and what they do with it.
The areas of focus are: the take-up, suitability, affordability and independence of the advice, guidance and information available to those approaching retirement and recommendations for improvement.
Conservative MP Richard Graham, committee member and chairman of the all-party pensions group, said: “Introducing much greater flexibility in how and when individuals can access their savings should be a positive change for many.
“However, getting the right guidance is key, and the inquiry will look at the guidance and advice being given, and how effective the system is in helping people make informed choices.”
The committee will ascertain whether people are adequately supported, and able to make informed decisions about their retirement following the launch of the pension flexibilities.
Patrick Connolly, financial planner at Bath-based Chase de Vere, said launching an inquiry was a sensible move.
“It is a completely new area of advice and a market that is still developing. There is a fear that many will make the wrong decisions, so it makes sense to identify the potential risks as soon as possible,” he said.
The deadline for written submissions through the committee’s website is 28 August.
Adviser View
Matthew Harris, director of Fife-based Dalbeath Financial Planning, said: “We believe that pension companies should have to spell out how much the consumer will receive after tax of each lump sum they withdraw, and how they should go about reclaiming any overpaid tax. This should be expressed in pounds, not percentages.”
