The Association of British Insurers (ABI) has called for a major shake-up to the advice market, including risk warnings for pension transfers and changes to the advice-guidance boundary.
A report into the impact of pension freedoms by the ABI has called on regulators to reform advice rules now that Brexit has offered the chance to get rid of the restrictions currently in place. The ABI said that EU guidelines around what constitutes advice are far too restrictive and it has demanded a full review of the UK watchdog's Handbook of rules and guidance.
Pension freedom rules, introduced in 2015, mean those aged over 55 no longer have to purchase an annuity to access their pension income but can enter drawdown or take a cash amount instead.
We urge government and regulators, working with the industry, to act on our recommendations, to deliver the changes needed to improve the outcomes for present and future retirees"
The ABI wants pensions and insurance companies to be able to give more guidance to their customers without it being classified as formal advice, which has to be given by qualified professionals. It says the current rules, created by both the EU and the FCA, make this difficult.
Yvonne Braun, director of policy, long-term savings and protection at the ABI, said: "Nearly five years on from their introduction, it is now time to review how the pension freedoms are working. They may have brought about a retirement revolution, but it is too soon to tell how things will turn out.
"This report highlights some warning signs. We urge government and regulators, working with the industry, to act on our recommendations, to deliver the changes needed to improve the outcomes for present and future retirees".
Providers, who make up the majority of the ABI's membership, have long-complained about the advice - guidance boundary and how it can restrict the information they can give to their members about their pension choices.
"Retirement decisions are very complex," said Rob Yuille, head of retirement policy at the ABI. "Too many people at present are making them alone. There is more providers can do and have to do to help consumers make decisions."
The ABI also warned that the rate at which over-55s are withdrawing cash from their pension pots could leave some at risk of running out of money in retirement. Full withdrawals have risen to their highest level since the introduction of freedoms in 2015, with 40 per cent of withdrawals at an annual rate of 8 per cent and over, with the report noting that this is "not sustainable" for most savers.
Data published by HM Revenue & Customs last month showed in total, almost £33bn has been withdrawn from schemes since the introduction of the freedoms in April 2015.
ABI outlined a number of recommendations within the report, including calling on The Pensions Regulator to adapt rules on guidance and advice in order to encourage a "step change" in the support offered to members.
It has also called on the Department for Work and Pensions to introduce a requirement for schemes to send members requesting a transfer out of a defined benefit (DB) arrangement a letter outlining the risks.