The wide-ranging inquiry, chaired by member of parliament Frank Field, will cover 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.
Industry observers are already saying that this will put further pressure on the government to bring forward proposed clampdown on fraudsters, including a cold-calling ban.
In a statement, the committee said police data showed that over £43m (€48m, $58m) of people’s retirement savings have been lost to fraud since the policy was announced.
The UK’s Pension Regulator also warned that their anti-scammer “kitemark” is being used fraudulently by scammers and the Department for Work and Pensions brought forward proposals for further anti-scam measures.
The committee said it is “keen to hear of people’s experiences with scammers, and what might be done to prevent these potentially devastating losses”.
Vital protections needed
In early reaction, Tom Selby, senior analyst at AJ Bell, said: “The committee’s decision to launch an inquiry into the freedoms will hopefully put a rocket up officials dilly dallying over the implementation of vital protections from scammers, including a proposed ban on cold-calling.
“The Government’s commitment to introduce the reforms at the earliest opportunity simply isn’t good enough – hopefully the committee can hold policymakers’ feet to the fire and accelerate the introduction of these measures.”
He added: “While FCA data suggests many savers are taking their entire pension pot as cash, it’s worth noting the vast majority of these are small pots. While information on the overall sustainability of withdrawals is scarce, nothing we have seen so far points to retirees being hugely irresponsible and splurging their hard-earned savings on fast cars and luxury holidays.”
Joined up thinking
Jon Greer, head of retirement policy at Old Mutual Wealth, said given the Financial Conduct Authority is already looking into pension freedoms, it is crucial the two bodies join up their thinking.
“The FCA are already in the process of exploring pension freedom reforms and have raised concerns about non-advised drawdown so there is an opportunity for joined-up thinking.
“When pension freedoms were first introduced they were spearheaded by the then chancellor, George Osborne. The legislation was introduced quite rapidly for such a fundamental reform to the savings system, and caught a lot of people off-guard. That is why, two years after the reforms were introduced, policymakers are still asking questions.”
He added that Constantly changing policies is hurting the savings culture and if people think more changes are coming down the pipeline, they are likely to lose even more faith.
“A consultative approach to policymaking could help make that culture more healthy and sustainable. Ideally we need a cross-party group to convene to set out a long term vision for pension policy, rather than have the party in government introduce reforms which are later queried by other MPs.”
The committee is asking for written evidence on any or all of the following by Monday 23 October 2017, 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?