PENSIONS could become the next mis-selling scandal if stronger support is not offered to consumers taking up the new retirement freedoms, MPs have warned today.
The reform which allows the over-55s withdraw their entire pension pots are 'not yet operating entirely as it should' and a lack of clarity was 'endangering' the savers, according to the House of Commons Work and Pensions Committee.
It was claimed the new freedom would allow pensioners or those approaching retirement to blow their pots on a Lamborghini if they wished.
But the MPs report warned: "To not provide the basis for a well-informed choice could lead to the next major pensions mis-selling scandal."
Improvements to guidance and advice were crucial to the success of the policy, the committee explained, urging the UK Government to do more to highlight the dangers of pension scams to consumers.
The new freedoms give people aged 55 and over greater choice on how they can use their pension pot. Generally, the first 25 per cent of the pot is tax-free and the remainder is subject to tax.
A free guidance service - Pension Wise - was introduced alongside the reforms, offering a one-off 45-minute guidance session in person or over the telephone together with information online.
The committee said Pension Wise was created to fill a potentially dangerous gap in support for consumers, including many people who are unable or unwilling to pay for independent financial advice.
But it described the Pension Wise website as "not fit for purpose", adding: "It is static, offering no opportunities for personalisation and lags well behind many private services."
The report called on the Government as a "matter of urgency" to ensure the website provided a calculator so people could work out what their income might be as well as examples tailored to people's individual circumstances.
Consideration should also be given to the possibility of offering customers two or more Pension Wise guidance sessions rather than just one, the MPs said.
Frank Field, the committee chairman, said: "These reforms have been in operation for six months now; it is evident that that has been long enough for the scammers to get going, working on defrauding people out of their life savings. It should be long enough for Government to have published some data about how the reforms and the attendant guidance and advice are working."
He added: "We have seen all too clearly, too many times, what happens when financial information is not properly provided and regulated. We, literally, cannot afford another financial mis-selling scandal."
A Treasury spokesman stressed how the Government had been clear that any attempt to exploit people who had worked hard and saved for their retirement was unacceptable, which was why it was working with the police, regulators and other bodies to raise awareness and take action to protect consumers.
"Six months since its launch, Pension Wise has been a real success story with 1.5 million visits to the website and over 20,000 guidance appointments; we've already committed to making this data available on a regular basis.
“We're continuing to build on this success, promoting the service through a national marketing campaign and our local guiders are considering ways to make Pension Wise even more useful for consumers,” he added.
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