Pension freedom tinkering is response to negative press

Pension freedom tinkering is response to negative press

Should it concern advisers that, under a barrage of criticism from the press, the government is considering price capping withdrawals from pensions?

This is a very pro-market government. It’s one that is expected to give markets time to work before intervening. So aren’t these price-cap discussions a bit of a surprise?

I wouldn’t hold myself out to be much of a political pundit, but the first version of this column was written before the Treasury had announced its decision to consult on a cap on pension exit charges and the easing of pension transfers. I was going to warn that it looked like a possibility.

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It was clear from examining the full statement from Conservative peer Lord Freud (made before the announcement in the House of Lords) that something might be up because the government sounded as if it had been put on the back foot, following stinging criticism of exit charges from Labour’s Lord McFall and TPAS board member Baroness Drake.

It was also interesting to see Labour trying to put pressure on Ros Altmann, using quotes from when she was still a consumer campaigner and not a minister.

We won’t have the consultation for a few weeks, but we know there is a risk of a sort of rolling intervention that won’t reverse the reforms but will still try and make them sound as palatable as possible to consumers. Note that I say ‘sound palatable’. It might make things worse. There is a risk of overkill with more regulation getting in the way of what is the excellent work advisers do.

Actually, I think it won’t probably affect advisers too much – by their very nature it is difficult to cap adviser charges – but, as is the way with all regulation, I wouldn’t bet the house on it.

One of the big questions is why?

Actually, the answers are pretty clear. First, the reform was rushed. Twelve months were not enough. Second, the reform did not require pension providers or indeed trustees to offer all the freedoms.

That has certainly led to disgruntlement and confusion. So while fleet-of-foot firms are clearly determined to maintain their market shares – say, for example, Standard Life, LV= and Hargreaves Lansdown – others are doing the bare minimum.

Some providers will have embraced reforms reluctantly and may have decided that, given they never expected the legislation, they are entitled to levy large admin charges in favour of the remaining members. Well, it’s an argument of sorts.

Indeed, the lack of ease of movement may also carry the risk that a market is opening up for fly-by-night operations to help people access assets swiftly, but perhaps at the expense of losing substantial chunks of their pensions as fees. It doesn’t sound good.