The shadow secretary of state for work and pensions has warned “tougher questions” need to be asked about “this so-called pensions freedom”.
Speaking at the Labour party’s annual conference yesterday (28 September), Owen Smith argued for more pensioner protection.
“Let’s start by asking some tougher questions about this so-called pensions freedom – and about the risks that it might pose.
“Now I know many will welcome the chance of accessing their pension savings, and some may do better at managing the money.
“But I worry that friends and neighbours will be preyed upon by the financial sharks that are already circling. We’ve seen too many mis-selling scandals in recent years and we can’t afford another.”
Last week, Paul Lewis, the presenter of Radio Four’s Money Box, raised concerns about providers pushing drawdown, stating that it is a “potential mis-buying scandal”.
He said it was unacceptable that so many providers had pushed pension pots into drawdown when trackers have lost nearly 16 per cent in the last six months.
He told delegates “that [drawdown] is not what you want in life. You want certainty, not risk.”
According to data published by the Association of British Insurers, in the first three months since the April at-retirement reforms, £2.5bn was paid out from pension pots and, of this, more than £2.3bn was being used to buy regular income products such as annuities or income drawdown.
When asked whether the amount of drawdown business being done at the moment constitutes the start of a mis-selling scandal, Mr Lewis said: “No, but it is a potential mis-buying scandal.”
He said: “Somehow the industry has to rescue something from this [pension freedoms] wreckage. It has to come up with a low cost product that gives consumers certainty and flexibility.”
Back in March, Labour’s then shadow pensions minister Gregg McClymont pledged to monitor but not unwind the pension freedoms announced at last year’s Budget.
He said the governing parties would “lose face” if they have to intervene post-April, not wanting to be now seen as “too paternalistic”, adding that his party was more concerned about people potentially squandering their pension pots or being the victim of scams.
Following the election, Lord Bradley was appointed to shadow Ros Altmann in the House of Lords, but since Jeremy Corbyn was elected at Labour leader earlier this month, first time MP for Torfaen Nick Thomas-Symonds has become the new shadow pensions minister.
In its pre-election manifesto, Labour detailed plans to reform the market so that “pension providers put savers first and protect consumers from retirement rip-offs”, adding that the party would require disclosure of voting by institutional fund managers on executive pay.
Former leader Ed Miliband also supported greater flexibility for those drawing down their pension pots, but added that there must be “proper guidance” for people to avoid mis-selling.
peter.walker@ft.com7
