A hot topic of conversation last week was Channel 4’s Dispatches programme on the impact of the imminent pension freedoms, as the government launched its Pension Wise guidance service.
What did we learn from Dispatches, apart from the fact that Michael Buerk really enjoys his golden years, and many others won’t?
The value of the investigation was in the individual case studies and vox pops that clearly demonstrated the dangers to which the reforms will potentially expose savers.
There are people for whom their pension is now a new kitchen, or a nice holiday. There are poor investment schemes that will benefit from people’s lack of awareness of the risks.
On the other side, there is the poor-value ‘annuity trap’ that some savers are desperate to escape, with Steve Webb’s suggestion of trading in their annuities appearing like a desert mirage.
But ask people generally what they want from their retirement pot and the majority say they favour the guaranteed income provided by an annuity.
Illustration by Ben Jennings
How do these wishes and contradictions all fit together? It will be up to the “free and impartial” guidance provided by Pension Wise to help people through that decision.
Despite all the problems with annuities, if people are expressing a wish for income security they should be guided towards the annuity market.
The risk is that the product has become so tainted by bad practices – and the weakness of government and regulators to address them prior to last year’s dramatic intervention – that people are turned off from what they really need in retirement.
The danger is also that to the ordinary person, pensions liberation and pensions freedom mean exactly the same thing, and one person promising to unlock your pension pot is just as good as another.
There are too many unanswered questions about this guidance, the people who are due to provide it, and where savers will end up. But it is too late to turn back the ship.
Ian Smith is editor of Pensions Expert. You can follow him on Twitter @iankmsmith and the team @pensions_expert.
