Royal London: customers not ready for pension reform

Life and pensions group Royal London today warned that customers are not prepared for sweeping changes to the way they take their retirement savings as it reported a surge in new business.

The mutual owner of the Scottish Provident brand said many people may make the wrong decisions as a result of so-called pension freedoms, which will allow those aged over 55 to take their pension pot as a cash lump sum.

Chief executive Phil Loney said: “The meticulous approach to implementing change is certainly not a feature of the government’s latest pension reforms. We wholeheartedly support the policy objective but customers are not ready for the new pension freedoms, which have been thrown into place in an entirely unrealistic timescale.

“I fear that many will make the wrong, often irrecoverable decisions about their retirement and this will result in some very poor outcomes. 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 added: “George Osborne’s pension reforms have 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.”

Loney’s comments came as Royal London reported a 39 per cent jump in new life and pensions business to £4.8 billion for 2014, boosted by an 83 per cent surge in group pensions sales.