Consumers need stronger support to avoid falling victim to pensions mis-selling, according to a new report from the House of Commons Work and Pensions Committee.
Avoiding a pensions mis-selling scandal
The report comes six months after the pension freedoms were introduced and questions whether the arrangements are operating as they should. It highlights a lack of clarity which is ‘endangering pension savers’.
The pension changes have not been accompanied by the tools needed to make a well-informed choice and this could lead to the next major pensions mis-selling scandal, according to the report.
On scams, the committee said: ‘The pension freedom reforms have increased the prospects of people being conned out of their life savings.’
The report also calls on the government to:
- Provide more anti-scam publicity and introduce stricter reporting requirements for pension providers;
- Reduce the use of jargon and complex pricing structures for savers trying to withdraw funds;
- Clarify the distinction between guidance and advice;
- Clarify the definitions of safeguarded benefits.
Which? has developed free tools and videos to support those facing the new choices, in our new pensions and retirement hub. You can also learn how to how to spot a pensions scam using our comprehensive Consumer Rights guide.
Pension Wise comes under scrutiny
The government’s free pensions guidance service, called Pension Wise, is also covered in the new report.
The service is provided either over the phone or face-to-face and will usually take you through your options over the course of around 45 minutes.
However, take-up of the service has been lower than expected, prompting several recommendations from the Committee:
- Stronger signposting to the Pension Wise service by pension providers;
- More personalised guidance to be offered by Pension Wise, incorporating an enquirer’s wider financial circumstances;
- Improvements to the Pension Wise website incorporating interactive features like an income calculator;
- A firm timetable for the introduction of an online ‘pensions dashboard’, which would allow people to see all their pensions savings in one place, to be set out by the government;
- Data on Pension Wise, and the advice and pensions markets, to be published every three months.
Which? has created downloadable checklists of tailored questions to help you get the most out of your Pension Wise session. These downloadable PDFs can be printed out and taken to a face-to-face interview or used as a prompt during a phonecall.
Which? calls for effective guidance
Which? executive director, Richard Lloyd said: ‘Access to advice is fundamental to the success of the new pension freedoms, so 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.
‘The Committee is also right to flag costly and complex charges as an issue, and the government must focus on this as it works with regulators and industry to ensure everyone can make the most of the new freedoms.’
The Which? Better Pensions campaign is calling on the government, pension providers and regulators to protect people when they take money out of their pension by:
- Establishing a government-backed provider to ensure everyone can access a good value, low cost product;
- Introducing a charge cap for default drawdown products;
- Safeguarding savings in schemes that go bust.
You can support the campaign and help us secure better pensions by signing our petition.