What is likely to be seen as potentially significant evidence about the effects “pension freedoms” have had on some retirees’ lives has begun to emerge from a handful of submissions that have been made thus far to a UK government inquiry into those pension freedoms, with one commentator describing the case of a man who had released £120,000 from his pension pot and “spent every penny on gambling, a car and alcohol”.
Former pensions minister Baroness Ros Altmann, meanwhile, calls in her submission for PensionWise guidance to be made mandatory before people are allowed to withdraw money from their pensions beginning at the age of 55.
PensionWise is a service that was set up in the wake of the coming into force of the pension freedom rules in 2015, to offer financial guidance online, over the telephone and in some cases face-to-face, to those looking to take money from their pensions.
The Commons Work and Pensions Committee launched the inquiry in September, in an effort to find out whether the “pension freedoms” introduced by then-chancellor George Osborne were operating as the policy intended. The deadline for submissions was yesterday.
‘Aware of safety net’
In one of nine submissions thus far posted on the government’s website, a welfare rights officer for Lancashire county council named Pamela Hewitt describes the case of someone she refers to simply as “Male A”, though she said she knew of “four similar cases with smaller amounts of money spent/disposed of”, all of which saw the individuals in question ending up “continuing on benefits”.
Hewitt says in her submission that although she “strongly” believed that Male A “did not get rid of his money [obtained through the release of his pension] in order to claim benefit, he was aware that if he spent all of the money there was a safety net available to him”.
‘Notable gaps in the market’
In her submission, Baroness Altmann maintains that pension freedoms were a good idea, but that there are “notable gaps in the market that are hampering consumer outcomes”.
“It is excellent news that the [Commons Work and Pensions] Committee is looking into this issue,” she said.
“I believe the ending of mandatory annuitisation is the right decision, especially in the current interest rate environment. The freedom and choice reforms are a major improvement on the old system, but people need help to understand how best to manage their pension savings through their lifecourse.
Defined contribution pensions are more user-friendly now, and DC pensions can even have advantages over DB pensions, which was rarely the case prior to the new rules.”
Baroness Altmann was particularly forceful on the question as to whether the UK government and FCA were taking “adequate steps to prevent scamming and mis-selling”: “Definitely not”.
“At the very least we urgently need to introduce the ban on pensions cold-calling,” she said. “I am trying to do this via the Financial Guidance and Claims Bill, there is cross-party support; yet the DWP is resisting this.
“We could get the ban introduced much more quickly by using this current legislative opportunity.
“If it does not happen now, then there is no bill in sight for another couple of years perhaps.”
It is a fundamental fact of scams and frauds, she noted, that almost all of them “will normally be initiated by an unsolicited approach”.
‘Authorities doing nothing’
One pension scam victim who has made a submission to the Work and Pensions Committee inquiry on pension freedoms that hasn’t yet been posted told International Investment his comments had focused on the fact that “the authorities are seeming to do absolutely nothing to prevent the scam or prosecute the scammers”.
Based on his own efforts to go after the companies and individuals responsible for scamming him, he told the W&P committee that he had “compiled a significant body of narrative with compelling evidence of those who are directly contravening FSMA 2000 s.238 or are knowingly concerned with the contravention of FSMA 2000, s.238, but neither the FCA nor Action Fraud have shown any interest whatsoever”. (Action Fraud is the UK’s national fraud and cyber crime reporting centre.)
“In my experience, this is the tale of many pension scam victims,” added the victim – a resident of Milton Keynes in the UK who asked to be identified here only by his first name, Stephen – in his submission.
“The very system designed to protect me from scammers failed me, and when I reported it to the authorities, I was abandoned, and the reason given to me was that the adviser transferring my pension was unregulated.
“Neither the Government, nor the FCA, nor Action Fraud are visibly taking any steps to prevent scamming and mis-selling, and the victims are then abandoned when they report it to the authorities because the perpetrators are ‘unregulated’, the consequence of which is victims then discover they have lost significant rights and access to the FSCS.
“The scammers will openly continue to flout the law and transfer people’s pensions into unregulated high risk investments because they can for as long as the FCA and Action Fraud demonstrate they have no teeth.
“The very system designed to protect me let me down, abandoned me and now denies me justice by refusing to prosecute those that ‘unlawfully obtained my pension’, to use [pensions minister] Guy Opperman’s own words.
“The Government openly acknowledges [that] “£43m has been unlawfully obtained by scammers since April 2014″, [but] how many of those breaking the law [by scamming people out of their pensions] have been prosecuted since 2014? None.”
To view the comments that have been posted thus far on the government’s website, click here.