The government and regulator need to urgently work closer together to set out clear guidelines for the financial services industry in dealing with recent reforms to pension legislation, according to Scottish Friendly.
The mutual stated that many pensioners attempting to withdraw their cash lump sums are hitting stumbling blocks when it comes to accessing their money, often because advisers and providers are cautious due to fear of mis-selling.
Neil Lovatt, product director at Scottish Friendly, said there is widespread concern that they could be exposed to later charges of mis-selling, should clients later complain about little or no income later in life.
“As such they have been cautious in dealing with people wanting to cash in their pensions; despite the fact the government is eager to let consumers have ready access their savings,” he commented, adding that “the passive-aggressive disagreement between the government and the regulator needs to be resolved.”
Earlier this month, the Financial Conduct Authority published a factsheet in response to queries on the issue of ‘insistent clients’, stating there is no rule to prevent advisers from transacting business against their advice if the client insists on doing so.
However, many advisers are still choosing to steer clear altogether.
As for providers, some have already drawn a line in the sand about non-advised pension transfers for clients trying to access their money since the 6 April reforms, while the ombudsman is so far backing life and pension firms by not applying the new rules retrospectively in transfer cases.
Mr Lovatt stated that on one hand the government is set on ensuring pension freedom is available to all and that customers know how to spend their own money, but on the other, the regulator will not give clarity on how to deal with clients who want to take their money, when doing so may not be in their best interests.
“The government and the regulator need to start a more coherent and open dialogue and create a blueprint that can be articulated clearly for customers and the industry.
“Right now it feels like a couple of parents arguing with one another via their children.”
Last week, the chancellor revealed the government is set to consult on exit charges to ensure that savers are not penalised if they wish to transfer their pension scheme to access pension freedoms.
Speaking at Prime Minister’s questions today, during which the chancellor stood in for the prime minister in his role as deputy, George Osborne said that the Treasury will consult to ensure people are treated fairly when moving their pension to one that offers the flexible options now enshrined in legislation.
In particular the consultation, set to launch next month, will look at options to address any “excessive” early exit penalties. These include, if there is evidence of such penalties, the option of imposing a legislative cap on charges for those aged 55 or over.