Life and pensions group Royal London, owner of the Scottish Provident brand, has given a stark warning that Chancellor George Osborne’s retirement savings reforms could backfire badly for many pensioners.
The broadside from chief executive Phil Loney claimed that many people may make wrong decisions as a result of the pension freedoms announced in the last Budget, which will allow those aged over 55 to take their pension pot as a cash lump sum.
Critics of the changes claimed they were “irresponsible” when pensions minister Steve Webb said at the time that pensioners should be allowed to spend money on Lamborghini sports cars if they wanted.
But Loney, unveiling a near-40 per cent leap in Royal London’s new life and pensions business to £4.8 billion for 2014, said Osborne’s pension reforms, which will remove the requirement for pension savers to buy annuities, had the potential “to become famous for helping people to improve their retirement incomes, but without plentiful and affordable financial advice they risk becoming an infamous example of political bungling”.
He said there had been a lack of meticulousness in the government’s approach to the changes and an unrealistic timescale for implementation on 6 April.
“I fear that many will make the wrong, often irrevocable, decisions about their retirement and this will result in some very poor outcomes,” Loney added.
“The simple fact is that many people, perhaps most, have not engaged with pension freedom and lack the basic financial knowledge to take the next steps.”
He said that Royal London, which has about 1,200 staff in Scotland, had advertised the Pensions Advisory Service in letters sent out to 3,600 customers without financial advisers in the final three months of 2014. Only 71 – less than 2 per cent – subsequently contacted the service.
Loney’s comments, seen as fuelling the rising debate on the issue, came as Royal London revealed that group pension sales surged 83 per cent to £2.2bn last year. Individual pensions jumped 25 per cent to £1.4bn.
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