Pensions committee warns industry is at risk of next mis-selling scandal over new freedoms

 
Caitlin Morrison
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George Osborne announced in his 2014 Budget that pensioners will no longer have to buy annuities (Source: Getty)

The work and pensions select committee is today publishing its report on pension freedom guidance and advice, in which it blasts reforms introduced in April as being “insufficient”.

The report, the result of an inquiry, announced in July, into recent pension reforms, states that “freedom to choose” is not enough: “People must have the freedom to make a well-informed choice.”

And the committee warns: “To not provide the basis for a well-informed choice could lead to the next major pensions mis-selling scandal.”

Read more: New pension freedoms will allow savers to cash in annuities

Frank Field MP, chair of the committee, said: “Reluctance to provide information about how a reform or service is working is rarely a good sign. It is very difficult for the government to support its claims that all is well, or for us to make any assessment of progress, when no data is forthcoming despite repeated requests.

“Good quality, co-ordinated and accessible guidance and advice will be the best tools to ensure people make the best, informed decisions about their retirement savings, and protect them from scammers. The Government must urgently provide some data about how this is all working, and close the gaps that are already apparent.”

The report highlights the gap between free guidance and full regulated advice and underlines the need to find solutions to close this gap, including a potential expansion of public guidance services.

However, Tom McPhail, Hargreaves Lansdown's head of retirement policy, said: “There is no evidence to justify this creeping nationalisation of the UK’s financial services.”

He noted that take-up of Pension Wise, the government advise service, has been “very modest”, adding “by comparison the pensions industry has in the main risen admirably to the challenge of the pension freedoms”.

Read more: Time bomb for pensioners as annuities shrink

“Hargreaves Lansdown recommends that before throwing more resources at the free guidance services, policymakers should explore the development of personalised guidance by the financial services industry,” said McPhail.

Meanwhile, Which? executive director Richard Lloyd said: “It's good to see the committee recommending the government moves quickly to improve Pension Wise so it provides the easily accessible, impartial and personalised guidance people need. Consumers should also have the full picture on their savings, so we welcome the committee recognising the importance of a pensions dashboard.”

Lloyd also said the committee is “right to flag costly and complex charges as an issue”.

“The government must focus on this as it works with regulators and industry to ensure everyone can make the most of the new freedoms,” he added.

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