The Work and Pensions Select Committee is rumoured to be considering whether to restrict the pension freedoms, according one of Britain’s biggest pension providers.
Both the government committee and the Financial Conduct Authority (FCA) are carrying out reviews to look at whether there are risks associated with pension freedoms.
One area of focus is whether people should only be allowed to exercise their pension freedoms if they have a certain amount of wealth to fall back on. According to Aegon, the pension firm, the government is rumoured to be weighing up whether to impose new restrictions.
Steven Cameron, pensions director at Aegon, says: ‘As the third anniversary of the pension freedoms approaches there has been talk in some circles of restricting access. This has largely been prompted by concerns that people may run out of money in retirement by overspending or invest unwisely and lose their savings.’
However, he cautions: ‘Any attempt to restrict the freedoms for those without an alternative source of secure income in retirement would be politically risky.’
Cameron adds that research carried out by Aegon found that putting restrictions in place would ‘divide the nation’.
A survey of 878 adults carried out by the firm found the pension freedoms have been extremely popular, with seven in 10 of those polled noting the freedoms have helped the transition into retirement, enabling them to supplement income from their pension with part-time work.
But when asked if the government should restrict the pension freedoms where people can’t show they have enough other secure income, including any state pension, to cover their essential costs, responses were split, with equal numbers agreeing and disagreeing.
The review is also believed to be looking at whether people should be allowed to go into drawdown without taking financial advice. Last summer the FCA found almost a third of pots are being moved into drawdown without any advice being taken. Prior to the pension freedoms, which were introduced in April 2015, the proportion of pension savers forgoing advice prior to entering drawdown stood at 5 per cent.
This has raised concerns that consumers are not shopping around for a potentially better deal, and are instead simply sticking with their existing pension provider.
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