THE clock is ticking down to what will be a godsend for some people and an unmitigated disaster for others.
Just nine months before “pension freedom day” the evidence is mounting that those seeking to take advantage of savers are better prepared than those who need to protect them.
Remarkably, however, calls for the reforms to be delayed remain muted even as it becomes increasingly clear that the industry can’t be ready by next April.
As ever, many savers will be left exposed to the less scrupulous elements of the financial services industry – with often disastrous and distressing consequences.
When Chancellor George Osborne unveiled the government’s pension reforms in March, the consensus was that adults are capable of making the right decisions with their savings.
That deeply flawed belief was accompanied by the similarly naive assumption that those savers would not then be exploited by banks, pension providers and other financial services companies.
Anyone who goes along with that argument has either been living under a rock for the past 25 years or has taken leave of their senses.
The manoeuvres began within hours of Osborne ending his Budget speech. The annuity providers watched aghast as their market value plunged, while other sections of the industry licked their lips at the mere thought of all those people taking their cash out of their pensions without the advice or expertise to invest it sensibly.
That is an admittedly cynical view of an industry in which the decent majority of firms have been tarnished by the activities of a toxic few. However, the threat posed by the latter will become greater under the proposed changes.
From pension liberation scams and overhyped buy-to-let “opportunities” to the high-risk investments sold in Sipps, those with pension windfalls to invest will be navigating a minefield.
It’s already clear, some nine months before the reforms take effect, that the regulator must pay especially close scrutiny to Sipp providers.
Complaints about unregulated and unsuitable investments sold to retirees through Sipps are rising dramatically, with the ombudsman ruling in most cases that consumers had been given dangerous advice.
Now the Financial Services Compensation Scheme has raised the alarm over the number of claims it has seen over the past year in which people have been wrongly advised to move their pension pots into risky Sipp assets.
And this is before Osborne’s so-called “pensions revolution” gives savers the freedom to do what they like with their pension pots.
No wonder the dissenting voices are growing louder. A former government actuary last week accused the Chancellor of putting tax revenues before the long-term security of pension savers. He pointed out that the Treasury is banking on large numbers of people taking their cash from their pension early. Even at the saver’s standard rate, that would generate far greater tax revenues than the current 55 per cent charge for taking out more than the 25 per cent tax-free cash.
But time is running out to ensure the needs of savers come before those of pension firms and the Treasury. Government, regulators and industry have just nine months to not only put the structures in place, but to get them right, not least the guidance service.
Can it really be done in that time? Not realistically, which is why the suggestion of a delay should now be taken seriously.