Savers using the “pension freedoms” may be forced to see Government-approved advisers before being allowed to take retirement cash.
A crossbench coalition of members of the House of Lords have made amendments to legislation whereby savers wanting to access their pension cash will be “automatically enrolled” into an appointment with Pension Wise, the Government’s free guidance service.
The pension freedoms, in place since 2015, allow over-55s to make cash withdrawals from pension savings whenever they like. They could take their entire savings as a one-off cash sum.
The reforms appear to have been used sensibly, according to most of the data so far published, with savers tending to access funds modestly and carefully.
But there have been several high-profile cases where a lifetime of savings were squandered.
In one instance, previously reported by Telegraph Money, a pensioner spent £120,000 on “gambling, a car and alcohol” before being forced to claim state benefits.
Lords, including former pensions minister Baroness Ros Altmann, argued extra rules need to be introduced not only to protect vulnerable people – but to ensure a future Government doesn’t reverse the freedoms altogether if more evidence emerges of people making poor choices.
If you’re already well informed, know your mind and have clued up using informative sources, why should you be forced to take official guidance, too?
If the amendment to the Financial Guidance and Claims Bill is not removed by MPs as it passes through the House of Commons, savers trying to take money from their pension pots will have to “opt out” of a telephone or face-to-face appointment with Pension Wise. This Government-backed service aims to helps savers understand their pension options and is well-regarded but has seen little take-up so far.
Some experts claimed putting a barrier between savers and their money would lead to a “barrage of complaints” and “unnecessary delays”.
Tom Selby, of AJ Bell, the broker, said: “If you’re already well informed, know your mind and have become clued up about the potential risks, why should you be forced to take official guidance, too?”
But Steve Lowe, of pension company Just, who backs the proposals, said unless “failings” in the reforms were addressed “we’ll see people losing out, particularly the vulnerable, and the Government starting to row back on the entire policy.”
Mr Lowe added that savers would not be forced into using the guidance service and could “opt out” if they felt it was not necessary.
Prior to the pension freedom reforms, savers were effectively forced to buy an annuity, an insurance contract that pays an income for life. After years of campaigning, led by this newspaper, former Chancellor George Osborne removed this requirement.
Since the introduction of the new rules in April 2015, more than £11bn of pension money has been withdrawn by hundreds of thousands of people.