Phil Loney, Group Chief Executive of Royal London, said:
"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."
Loney stated that Royal London have been promoting the services offered by The Pensions Advisory Service, yet "surprisingly few" of Royal London's customers without an adviser took up the offer to speak with the TPAS experts.
He said:
"Of the 3,600 letters we sent out in the final quarter of 2014, only 71 customers made contact with TPAS: a response rate of less than 2%. Given the importance of getting sound guidance at retirement, we are working with the Government's Pension Wise team on different signposting techniques that we hope will be more effective at getting our non-advised customers to take advantage of the new pensions guidance service.
Loney continued:
"I remain to be convinced that a new leaflet with a new logo, and a publicity campaign will dramatically improve response rates anytime soon. Meanwhile Citizens Advice report that they will only have a very limited capacity for face to face guidance in place for April.
"The FCA has recently introduced the requirement for pension providers to ask additional questions about personal circumstances and issue risk warnings about the adverse consequences of some decisions. We believe that this belated intervention will not solve the problem. Most people have no idea how close they are to the next income tax threshold or how the detail of means testing for welfare benefits works.
"A high priority on the “to do” list of the next Chancellor and Pensions Minister must be to address the advice vacuum for middle market savers, with clear direction given to the FCA to make rapid and substantial progress. Without appropriate impartial regulated advice there is a very clear risk that many over 55s will make inappropriate decisions which land them with an unnecessary tax liability and an inadequate income to live on.
"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.”
Last month, the the CEO of DeVere Group slammed the introduction of the new pension freedoms as “alarmingly chaotic”, saying that the "introduction of the government’s much-lauded new pension freedoms seems alarmingly chaotic on many levels" and that the landmark changes appear to be "rushed in a cynical attempt to woo older voters ahead of May’s General Election".
Yesterday, savings and ISA provider Scottish Friendly said that the pension reforms will bring about inevitable mis-selling claims, and that more needs to be done to ensure that pensioners and their retirement savings are protected from a "wave of mis-selling" as pensioners get targeted and exploited.
