Editorial: News that the Work and Pensions Committee will scrutinise the effects of the pension freedoms cannot have surprised many.
The findings of the Financial Conduct Authority’s earlier Retirement Outcomes Review – that many over-55s take out their pension money fully, or buy drawdown without advice – were too stark to overlook.
The Centre for Policy Studies’ Michael Johnson, one of the masterminds of the freedoms, stopped just short of admitting that the reforms had backfired, but his March proposal of auto-annuitisation at age 80 amounts to the same.
While the old model might have been suboptimal, it appears the baby was thrown out with the bathwater when the freedoms were introduced and any idea of default after retirement abandoned.
What can be done to fix the damage? The default drawdown cum deferred annuity idea is gaining traction, but whether there is any appetite among ministers to impose yet another change – possibly creating more confusion for people – is questionable.
While policymakers are likely scratching their heads, the FCA is doing its best to show the impact of the freedoms. In an act of bravery, it is also following through with its intention to clean up the asset management sector with new transaction cost disclosure rules for managers dealing with defined contribution clients.
As a consequence of these efforts, investment consultants are now also being investigated by the Competition and Markets Authority.
Amid opaque fee structures, conflicted consultants and short-termist policy, the requirements on trustees have grown exponentially. In response, the Pensions Regulator recently outlined the standards it expects of boards. While the trust-based model might not be perfect, it seems savers are more in need of someone to protect their assets than ever.
Sandra Wolf is editor at Pensions Expert. You can follow her on Twitter @SandraCWK and the team @pensions_expert.
