Speaking at a Westminster Employment Forum seminar today (5 November), Ronan O’Connor, deputy director for private pensions policy for the Department for Work and Pensions, responded to a question about whether government is concerned about savers failing to shop around for drawdown by saying: “Yes, we are concerned about that”.
He said: “It is true that there were many problems with the annuity market. There were many problems with the situation before pension freedoms, some of them were shopping around, some of them were the kind of one time nature of the decisions, some of them were the perception of the value and not of the annuity market but the problems.
“The issues that we face with any sort of decumulation decision that existed pre the pension freedoms now exist so yes we are concerned about that (people failing to shop around for drawdown) which is why I think we need to be really clear on the role of guidance and how far we can take guidance but also the importance of advice and getting support.
“It is exactly the question the Financial Advice Market Review is going to look at.”
His comments came after Association of British Insurers data published on Tuesday (3 November) showed £4.7bn has been withdrawn under the new pension freedoms since April.
The ABI found smaller pots are generally being taken as cash, while larger pots are still being used to access retirement income, with £5bn invested to buy nearly 84,500 regular income products, either annuities or income drawdown products.
The ABI’s data also shows that people are shopping around to find the best deal with 60 per cent of people changing provider when buying an income drawdown policy.
This compares to 40 per cent of customers who bought an annuity, where the ABI claimed customers are often offered guaranteed annuity rates by their existing provider.
The DWP’s Mr O’Connor was also quizzed about whether Pension Wise was working at the Westminster Employment Forum seminar today.
It was back in September that HM Treasury announced it was ceasing its oversight of government-backed guidance service, Pension Wise.
The move, which will happen before the end of this financial year, will see the service transfer to the Department for Work and Pensions (DWP).
Mr O’Connor said: “We think that Pension Wise is preparing people better than before. There is still more that we can do but there is still work to be done on understanding how far we can take guidance and the different ways we can deliver advice and make sure that people can understand the value of advice.”