MPs Warn Pension Flexibility Mis-Selling Scandal

MPs Warn Pension Flexibility Mis-Selling Scandal

A cross-party committee of MPs via Work and Pensions Committee has issued a report into the new pensions flexibility that started in April 2015.

The report suggests that the industry and the government are not providing enough information for consumers to make an informed decision about their retirement options and that many free guidance services funded by the industry such as Pension Wise and The Money Advice Service are simply failing to deliver given that the complexities of "at retirement" planning or simply the amount of consumers contacting them is not enough. They suggest that Pension Wise should now be overseen by The Money Advice Service given the take-up rates are "lower than many anticipated".

The cross-party committee suggests that free guidance are simply not enough and "could lead to the next major pensions mis-selling scandal".

Comment

The issue here is that pensions and pension statements are so complex today given that there have been over 40 pieces of legislation in the last 40 years that affect pensions and given that the financial advice industry has an open-ended liability when dealing with pensions, it is expensive for the "man on the street" to seek professional pensions at retirement advice. Whether we like it or not the regulator must either look at reducing a financial adviser's open-ended liability to help financial advisers reduce their costs and make pensions advice more accessible or allow greater freedom for offering guidance rather than in most cases it being classified as focused and personal advice.

In our opinion, Pension Wise and The Money Advice Service have been a total waste of hundreds of millions of pounds when a simple solution could have been to establish a "means tested" money advice aid service, similar to the old legal aid service. 

Highly qualified, professional financial advisers could be paid say £50 per consultation with a person who cannot afford high level pension advice instead of ‘the blind leading the blind’ which is the case today could be professional, Certified and Chartered Financial Planners offering subsidised advice services to the mass market.

Do the numbers! It costs the finance industry £80 million per annum to pay for the running of The Money Advice Service, how many £50 consultations with a "degree equivalent" qualified financial adviser would £80 million have bought each year? We suggested the means tested financial advice aid service six years ago to the Treasury Select Committee warning that the new rules on financial advice these would mean many big banking groups closing their financial advisory arms (which they did) and that the masses would no longer be able to access financial advisory services. We hope they will listen now.