Former pensions minister Steve Webb has admitted that pension freedoms are a "work in progress".
Sir Steve, who was appearing on the FTAdviser Podcast to discuss the impact of pension freedoms almost exactly four years after their introduction, said the benefit of the reforms was that there was a growing interest in saving for retirement.
He said: "They are certainly a work in progress, I’d agree with that. The funny thing is the initial fuss was will people blow the lot on the mythical sports car and will people be reckless and profligate and I think what people always forgot is that anyone who has built up a serious pension pot, on the whole, isn’t the mad spendthrift who blows the lot, on the whole they tend to be the most cautious, the people who are willing to sacrifice a bit now for a bit in the future.
"If they take advice the FCA on the whole is very positive about the outcomes. Almost the first sentence of the Retirement Outcomes Review said ‘this is a document about non-advised people’ and there it’s the other end of the scale that’s the worry.
"As you say it is about people taking the whole lot because what they really want is the tax-free cash, they don’t know what to do with the rest so they bung it in a cash Isa or they go into the drawdown that their provider happens to offer.
"The only one thing I would say is that in the past if you got it wrong at retirement and got the wrong annuity you were locked in for life. At least if you have made a poor decision and you are stuck in cash, there is plenty of time to do something about it."
Sir Steve was pensions minister when the reforms were introduced in 2015 and has since become director of policy at Royal London.
Appearing on the podcast with Sir Steve was Al Rush, principal at Echelon Wealthcare, who has been involved in helping steelworkers with their pensions following the British Steel Pension Scheme debacle.
Mr Rush said for these people, who had seen their defined benefit pensions transferred into self-invested personal pensions holding high-risk investments, the problem was to do with poor advice rather than the pension freedoms themselves.
He said: "These are people for whom the height of financial sophistication may have been a cash Isa for a couple of thousand pounds each year and I don’t think they understand what they have got in terms of pension freedoms."
Sir Steve and Mr Rush also discussed the tax implications of pension freedoms and the rise of DB transfers.
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