In ten days’ time more than 300,000 savers set to retire this year face new choices about how to finance their retirement, with the ending of the requirement to buy an annuity with their pension pot.
Labour supports greater flexibility for savers and pensioners. The annuities market wasn’t working, and it’s right that people have more options at retirement.
But we have warned from the beginning that strong protections needed to be put in place to prevent scams and mis-selling, and to curb rip-off fees. The government has ignored these warnings.
It has also ignored countless warnings from top industry experts, reiterated at a summit Labour held with key pension providers this week, that these reforms have been pushed through at a ‘reckless pace’, and that the lack of information and protection for consumers will allow fraudsters to ‘make hay’.
Most incredibly, the government has ignored warnings from its own pensions minister. Over the last few months we’ve had the bizarre spectacle of Steve Webb publicly warning against government policy, describing a ‘plague’ of cold calls from scamsters, and ‘crooks … clustering around older savers’.
Figures we published this week from the Information Commissioner, the body that monitors nuisance calls, showing that in the last year since the new freedoms were announced, more than 1,800 complaints were about pensions – a number which is set to rise.
Fraudsters and those looking to make a quick buck from persuading people to invest their savings in high risk schemes are already exploiting the void of information and awareness around these reforms.
Pension Wise, the advice service set up to guide people through these new freedoms, has only just opened, less than two weeks before the changes come in. And more than half of people approaching retirement aren’t even aware Pension Wise exists – a figure likely to remain low, since Pension Wise will officially launch during ‘purdah’, when no public money can be spent on advertising an initiative linked to a particular political party.
We also know that the Pensions Advisory Service, which will deliver the telephone advice component of Pension Wise, is still recruiting, and the government refuses to say how many staff are in post.
The fact that the pensions flexibilities will now be extended to millions more people who are already retired, means it is absolutely essential that we get this first wave of changes right. Labour will get a grip on this chaos and ensure the new flexibilities work for savers and taxpayers.
First, as Ed Miliband announced earlier this month, we will cap fees and charges on income drawdown products that are used to access retirement savings, to make sure that people are protected from rip-off fees.
Second, we’ll come down hard on any company or individual who is mis-selling products to people approaching retirement. We’ll create a cross-Government taskforce to bring together the numerous agencies working on scams and fraud – including the FCA, the Pensions Regulator, HMRC, the Serious Fraud Office and Action Fraud – along with ministers from relevant departments, to make sure efforts are joined up and to monitor and report on pensions scam activity.
Third, in contrast to the confusion we have seen under this government, the Pensions Minister will have clear responsibility for ensuring the right support and safeguards are in place to protect people from fraudsters, rather than passing that duty to others. We know we are likely to inherit significant problems as a result of this government’s failure to plan and prepare these changes properly, but under Labour there will be no shirking of the responsibility to tackle them.
And our retirement income taskforce, led by Professor David Blake is looking at how we can further ensure that products and protections are in place to meet the needs of low and middle income savers.
Under the Tories we risk repeating the pension mis-selling scandals of the 1980s and early 1990s, when over a million savers were wrongly advised to opt-out of their workplace pension scheme with often disastrous consequences for their retirement. Labour has a better plan to get these reforms right and ensure the market works for people who have worked hard and saved all their lives.