The pensions minister Steve Webb has been busy proposing even more reforms this week. His latest idea is to allow those who have bought an annuity to sell it on for cash. It sounds a simple and fair idea. But it could cause more problems than ever for millions of consumers.
Why? Because the pension freedoms announced in the last Budget, and set to come into force in April, are already causing headaches for the financial services industry and confusion among the public. Throwing another "unlocking" idea into the mix will only create further problems, I reckon.
Gregg McClymont, Labour's shadow pensions minister, agrees. He said: "Instead of making yet more policy on the hoof, he should spend his time actually sorting out the annuity sales process with all its defects and potential for detriment to consumers."
In fact, a charity is now warning that the existing plans could leave millions of pensioners penniless. Age UK reckons that the April reforms allowing people to make withdrawals from their pension savings could lead to many older people running out of money.
The charity has calculated that anyone withdrawing £3,000 a year from a £29,000 pension pot – which is well above typical retirement savings, by the way – would run out of cash when they were 75. If the annual withdrawals were increased with inflation – as is the case with some annuities – people would be broke by 74.
With the average life expectancy for 65-year-olds currently standing at 83 for men and 86 for women, the charity warns that even small yearly withdrawals would leave many pensioners facing several years at the end of their lives without any income from their private pensions. That would mean they struggled to make ends meet.
Caroline Abrahams, charity director of Age UK, says: "There must be additional checks and balances introduced to the pensions legislation, in addition to the impartial guidance that will be available. This is too important to leave to chance."
She's not alone in being concerned. While there's much sense behind the pension freedoms we're looking forward to in April, there's also a growing sense of unease over the potential disaster around the corner for many.
For starters, there are likely to be more pension scammers than ever looking to trick people this year. The key danger centres on the so-called pension-liberation companies, which it appears are being set up with the aim of deceiving people aged 55 or over into withdrawing their pension cash – as the new rules will allow – with devastating financial effects.
Experts have warned of a new wave of corrupt "boiler room" operations using high-pressure telephone sale techniques to target the over-55s. They will promise big returns in exchange for cash from small pension pots, saying they will invest in schemes such as Eastern European property ventures, which won't actually exist.
The challenge for the authorities – and the Government must take a lead in this – is to ensure that no one ends up losing the hard-earned money they've carefully saved up to pay for their retirement. Age UK wants more safeguards to help people understand the impact of their decisions about their pension pots. Without them, I fear we could be heading towards another financial scandal.
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