So many of us warned at the time that pension ‘freedoms’ were a BAD idea. We were right. Ironic then that a former pension minister who so favoured it (annuities bad, cash good) is quoted in this Times investigation bemoaning the result of her own making… pic.twitter.com/zucWIXkk4b
— Jennie Kreser (@pensionlawyeruk) July 20, 2019
Getting to the £4bn figure means starting with what we already know. There is a whole lot of money loose in our pension system which was previously destined to pay defined benefit pension schemes.
Whatever the reason for this explosion of transfer (and I think it’s got as much to do with quantitative easing and contingent charging as pension freedoms), the fact is that this money is now “at risk”.
The Times assumes that it’s the pension transfers that triggering most of the problems
and XPS’ evidence for this is their own data
Apart from some inconsistencies with the data (no fees too high in 2018), this looks like some really interesting work from one of Britain’s most respected actuarial consultancies. If these are the red flags being thrown up by XPS administration teams then the FCA’s scams prevention teams should be on the case.
The Times own investigators have come up with some interesting findings of their own.
There is no doubt that scamming is happening and it is clearly linked to pension transfers as new money floods into the pension coffers of people who are neither wealthy or used to managing wealth.
But to suppose that this £4bn of money is being lost to us because of the pension freedoms is a stretch too far.
Pension Transfers are not being sold as a means to liberate pensions using pension freedoms, the evidence is quite the opposite, people are being frightened out of DB schemes and incentivised by ridiculously high transfer values. I am with Alastair McQueen
Has anyone seen robust evidence of mass systemic abuse of the pension freedoms by savers? What I know is that c£25bn has so far been withdrawn via the freedoms (HMRC). This is out of c£5,000m in private pensions (ONS).
— Alistair McQueen (@HelloMcQueen) July 20, 2019
And to Alastair’s point – Andrew Young asks the all important question – where has all the money gone?
A lot more than this amount has been moved out of DB schemes. If not actually “withdrawn” according to HMRC definition, where has it gone? And what are the implications? We need proper analysis( which of course was not done before the policy change.)
— andrew young (@glesgabrighton) July 20, 2019
Where’s the money gone?
The real scandal is not the pension freedoms but the wilful destruction of the pensions infrastructure we have build these past 40 years.
The spike in transfers from 2016-18 coincided with the rise of contingent charging which allowed IFAs to fill their boots with transfer cases, many of which should not have happened. The bumper figures reported in the last three years by insurance companies used by IFAs and by the SIPP platforms on which IFA DFMs sit tell us where the money is.
This money is not all lost, some may have been invested into silly things but most is sitting in funds (including WEI) managed by the wealth management industry.
I do not think that this money is there because of the pensions industry, I think it is there because the financial services have seen a window of opportunity and have jumped right through it.