The UK's Work and Pensions Committee has launched a new inquiry into the pension freedoms reforms and its impact - including the rise of pensions scams - in a new consultantion released today.
The three-part inquiry will look at how the introduction of pension freedoms in April 2015 and how it has impacted on investors with the first stage of the investigation focusing on pension scams released in a statement today.
The committee has requested submissions of evidence of pensions scams to be sent in by September 9. A further look into accessing pensions and saving for later life will take place in 2021, the statement read.
More flexibility means more potential for the unscrupulous to take advantage and scam savers out of what will very often be their largest financial asset," Stephen Timms MP, chair of the Work and Pensions Committee
Announcing the inquiry Stephen Timms MP, chair of the Work and Pensions Committee, said: "The government's shake-up of the pensions system of five years ago will have brought new freedoms for people to plan financially for their futures"But on the flip side, more flexibility means more potential for the unscrupulous to take advantage and scam savers out of what will very often be their largest financial asset, crippling their dreams of a comfortable retirement."
Timms added that reported frauds could be just the "tip of the iceberg" and that the committee was keen to know what more can be done to prevent such scams, to halt what he called "the huge and devastating impact they have on those looking for security in later life"..
Tom Selby, pictured left, senior analyst at AJ Bell, blamed the introduction of pension freedoms reforms in 2015 for the rise in pension scams.
"Handing savers total freedom and choice over how they spend their pension pot from age 55 was always going to make them a prime target for pension scammers," he said.
"While the [UK] government was initially slow to grasp the magnitude of this risk, in recent years we have seen a far greater focus with pensions cold-calling banned and a nationwide advertising campaign launched by the FCA.
"It is vital that policymakers and the wider pensions industry continue to monitor scam activity and take action where possible to protect savers.
"But given fraudsters usually, by definition, operate outside of regulatory boundaries, the most effective way to protect people is to arm them with the information they need to avoid falling victim in the first place," Selby said.
Since being introduced in April 2015, the pension freedoms have been the subject of a number of investigations by both politicians and regulators. This, Selby adds is "no surprise" given the seismic impact the reforms have had on the retirement choices people make.
"Savers have embraced the flexibility opened up by the reforms, with most people now staying invested while taking an income via drawdown in retirement," he said.
"While it is impossible to make a definitive assessment about how sensible people's retirement decisions are without knowing their personal circumstances - including income sources, health and overall wealth - average withdrawals have trended downwards over the years.
"The latest HMRC figures suggest the average per person withdrawal stood at £7,100 in the first quarter of 2020 - down from £7,300 a year earlier. Although somewhere between 300,000 and 350,000 pots are fully withdrawn each year, the vast majority of these are small pots worth less than £30,000," according to FCA statistics.
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