Pension rules were reformed in 2015 as savers were granted huge levels of freedom in how they could access their pots. This brought with it obvious benefits but it also introduced a number of issues.
As the scope for pension withdrawals opened, it also brought with it unfortunate opportunities for scammers.
These scams will be the focus of the new inquiry.
As the announcement explained: “Pension savings are often people’s single largest financial asset. The high value and fact that people often do not have to engage with their savings until much later in life makes them an attractive target for fraudsters.
“The Financial Conduct Authority (FCA) and The Pensions Regulator say that 180 people reported to Action Fraud that they had been the victim of a pension scam in 2018, losing on average £82,000 each. They also believe that only a minority of pension scams are ever reported.”
They detailed that they are looking for insight into the actual prevalence of pension scams, the current trends among scammers and what role should the pensions industry have in preventing scams etc.
These submissions must be done by September 9 and they’ll likely guide the committees research.
The inquiry caught the attention of Jon Greer, the head of retirement policy Quilter, who was somewhat critical of the government’s efforts thus far: “Five years on from the revolution in the UK’s savings and retirement system, ushered in by the Freedom and Choice in Pensions reforms, policymakers can begin to analyse in detail how their policies have operated in practice.
“It is clear that the public have embraced pension freedom with open arms. Millions of people have chosen to build a retirement income strategy designed around their own needs, making their income match their retirement goals.
“However, we’ve also seen a process of continuous adaptation and amendment over the last five years as extra regulation and legislation has been passed to keep up with the unexpected changes that have emerged out of pension freedoms.”
He went on to provide an example of this difficulty: “There are numerous examples of this, with one of the most prominent being the Government’s rather slow introduction of a cold-calling ban designed to protect consumers, which followed an earlier petition that won widespread industry and public support.
“This was a sensible move but came too late for some people.
“And government should also now consider whether the rise of online fraud and impersonation scams also needs to be addressed in order to ensure consumers continue to be protected to the highest level possible.”
Despite the problems highlighted, Jon shared that he thought that having an inquiry is the right thing to do.
He also explained that this inquiry could provide the government with the opportunity to look into other areas of the pension system that could also do with some amending: “It is right that we review and learn from some of these challenges. Many reforms were retrofitted into the system after pension freedoms had come into effect, and could have been considered from the outset had there been a more consultative approach.
“As the consultation moves beyond scams to look at the wider impact of pension freedoms we’d also like to see MPs consider whether aspects of the system are working as they should.
“The Money Purchase Annual Allowance, for example, is a contradiction to the principles of freedom and flexibility. Government should consider whether this is achieving the desired outcome and explore whether a general anti-abuse approach could work better than the rigid, strict approach currently employed.”
Published at Tue, 28 Jul 2020 20:42:32 +0000