MPs are concerned about a rise in pension scams and whether advice and guidance offered around the Pension Freedoms is good enough. The probe will follow up on an inquiry which took place shortly after the reforms were introduced in 2015.
One major concern is the potential for fraudsters to target people thinking about accessing or moving their pension pots. The committee says that police data shows that over £43 million of people’s retirement savings have been lost to fraud since the pension changes were made.
Recently the Pension Regulator warned that their anti-scammer “kitemark” is being used fraudulently by scammers and the Department for Work and Pensions has brought forward proposals for further anti-scam measures. The committee is keen to hear of people’s experiences with scammers and what might be done to prevent devastating losses.
Frank Field MP, chair of the committee, said: “Pension freedom and choice liberated savers to choose what they wanted to do with their own money. This was welcome but as with any radical reform it is important to monitor its practical effects closely to ensure it is working as envisaged. In this case it is vital that adequate support ensures people are equipped to ensure they don’t make decisions they subsequently regret.
“I am particularly concerned that savers are more vulnerable than ever to unscrupulous scam artists. This policy must not become the freedom to liberate people of their savings.”
The inquiry will have a wide scope and will look at the current picture of what people are doing with their retirement savings and how they chose their paths, the information and guidance available, and the way the pension product market is working
The committee says that research indicates that people are making their pension choices without enough support, increasing the risk that they will not get the best value from their savings. Of people aged 55 and over and planning to retire in the next two years, just 7% used the impartial Pension Wise guidance service.
Market research for the Financial Conduct Authority found that early access of pension pots has become the ‘new norm’ and that most who do so take a ‘path of least resistance’, with low levels of shopping around, say MPs.
Nest, the state-backed workplace pension scheme, also recently expressed concerns that its millions of members may be at risk of running out of money, be hit by high charges or pay additional tax as a result of inadequate support structures being in place.
The committee is inviting written evidence on any or all of the following by Monday 23 October, including recommendations for improvements in each case:
- What are people doing with their pension pots and are those decisions consistent with their objectives? Is there adequate monitoring of the decisions being made?
- Are people taking proportionate advice and guidance and if not, why not? Are people adjusting behaviour in response to advice and guidance?
- To what extent will pensions dashboards enable consumers to make more informed decisions about their retirement savings? What are the remaining obstacles to their creation and success and how should those obstacles be overcome?
- Is Pension Wise working? If not, how should it be reformed? Are there any implications for the proposed creation of a new single public financial guidance body?
- Are there persistent gaps in the advice and guidance market and what might fill them? Is automated advice and guidance filling gaps as expected?
- Is there evidence of product market competition resulting in cheaper, clearer or a wider products for consumers? Are people switching from their pension provider in accessing their pots? Is an adequate annuity market being sustained?
- Are the Government and Financial Conduct Authority taking adequate steps to prevent scamming and mis-selling?
- Are the freedom and choice reforms part of a coherent retirement saving strategy? To what extent is it complimentary to or undermined by other policies?