Nearly two-fifths of advisers fear that their clients could be targeted by potentially risky offers from unregulated firms following the new pension freedoms, according to a new study by Prudential.
The new research, conducted by PollRight on behalf of Prudential among 120 advisers, claims the biggest threat the success of the pension freedoms is the risk of retirement savers running out of money after cashing in funds.
However, there is also widespread concern about clients taking unsuitable products, not least those promoted by unregulated promoters or outright scams which will target vulnerable savers, many of whom may not take advice.
Around 86 per cent of advisers believe that retirement savers will be targeted by risky offers from unregulated firms. Adviser are more optimistic about their own clients, with 59 per cent saying they are not concerned about this affecting retirement outcomes.
The findings come after a report in the Mail on Sunday revealed pension scammers would be able to buy the personal details of thousands of savers for as little as 5p per name. The Information Commissioners Office has opened an immediate investigation and has said it will pass information onto police.
In January this year, a Channel 4 Dispatches documentary found up to 2m people could be the target of unregulated firms seeking to take advantage of the new pension freedoms from April to encourage people to transfer their savings.
Last Friday (27 March) FTAdviser’s sister publication the Financial Times had an interview with pensions minister Steve Webb in which he played down suggestions of a pension mis-selling scandal.
Mr Webb said: “On defined benefit, there is a third line of defence, if you like.”
“This is the mandatory advice that people will have to pay for [if the transfer value is £30,000 or more], if they initiate the transfer, so that is barrier number one.
“They go through all their stuff with someone who talks them through the options and potentially recommends they stay put, not always, but in most cases (so that’s) barrier number two.
“And then if they are insistent what does that actually mean? It means they’ve had it explained to them. But if they have a different set of priorities, is that wrong?”
Meanwhile, some 49 per cent of advisers surveyed by Prudential believe the political risk of further law changes is a major threat to the success of the pension freedoms whilst 52 per cent warn that the possibility of savers incurring unnecessary tax bills will undermine the reforms.
Vince Smith-Hughes, retirement expert at Prudential, said: “The launch of pension freedoms is a major opportunity for advisers and providers to substantially boost clients’ interest in and understanding of retirement saving.
“But there are clear risks from people being targeted by unregulated providers offering solutions which seem to promise better returns without explaining the potential risks.”