The shadow pensions minister has accused the Conservative government of opening pensions up to a “whole new world of uncertainty” which without action to improve the Pension Wise guidance service, could create “the next great mis-selling scandal”.
Published this morning, the Work and Pensions select committee’s report into pension freedom guidance and advice found that among other things, a lack of regulatory clarity is endangering pension savers.
Labour’s shadow pensions minister Nick Thomas-Symonds said that the report echoes his party’s concerns over pension freedoms, adding that ministers responsibility to protect and inform consumers is enormous.
He said: “Unfortunately, they are currently failing on both fronts. Since pension freedoms have been introduced, money lost through scam activity has increased and people do not have ready access to the support they need to make well-informed choices.”
He also noted the report’s findings that the numbers of people seeking free guidance is too low, while the gap is growing between it and “expensive independent financial advice”.
“Labour is urging the government to look very closely at this report and act now in order to avert the next great mis-selling scandal,” added Mr Thomas-Symonds.
His concerns were shared by Barnett Waddingham senior consultant Malcolm McLean, who expressed particular concern over the need to make an improvement in the provision of guidance and advice.
Mr McLean said: “I am sure we can all support the committee’s view that there is a lack of clarity - certainly in the minds of the public - as to the difference between guidance and advice and the confusion this can cause.
“There is also surely a need to encourage a wider involvement in the provision of factual information about the options available by, for example, employers in the workplace who currently are disinclined to get involved in the face of warnings from the regulator about the importance of them not giving advice.”
Richard Parkin, head of retirement at Fidelity Worldwide Investment, pointed out that in the case of the new freedoms, customers often already have a clear idea of what they want to do and can be resistant to any advice or guidance that they perceive is getting in the way.
“We’d ask government and regulators to consider whether some of the language and positioning used around pension freedom is supportive of customers seeking expert help.
“A tendency to suggest the choices are simple and to accuse all the industry of ‘getting in the way of freedom’ neither presents customers with a balanced view of the complexity of retirement nor gives them confidence that pension providers and others can help them make sensible choices.”
Hargreaves Lansdown’s head of retirement policy Tom McPhail, commented that there is no evidence to justify any “creeping nationalisation” of the UK’s financial services.
“The provision of tools, information, telephone and email support as well as shopping around services by the pensions industry dwarfs the efforts of Pension Wise,” he stated, adding that before throwing more resources at the free guidance services, policymakers should explore the development of personalised guidance by the financial services industry.