There's no doubt that since their introduction in 2015, pension freedoms have revolutionized the choice that people have when thinking what to do with their pension pot. But are they working properly?.
No, is the opinion of Baroness Ros Altmann, who says that pension freedoms are not working because millions of people have no independent advice or guidance. Talking about the Financial Conduct Authority (FCA) Outcomes Review, she said that it highlighted the need to redesign drawdown for new customer profiles and regulators should insist on better investment options, cost transparency and threaten to cap charges on drawdown.
Whilst the 'wake up' packs at the age of 50 and the pensions passport are major improvements in her opinion, overall she believes that the new pension freedoms regime is not working well enough for customers and providers are failing to innovate.
"The FCA's latest report on how Pension Freedoms have impacted the retirement income space shows that there is much work still to do to ensure the new regime works well for pension savers."
"Those customers without financial advisers are not being well-served by the existing market and providers have failed to innovate sufficiently to serve their customers' needs."
"With more and more people relying solely on such pensions - which place all the risk onto the individual - it is vital that customers have access to good value, suitable products, independent guidance and advice to help them make the most of their pensions."
She said she believed the government was "absolutely right" to scrap the previous mandatory annuitisation regime.
But she added: "Unfortunately, the evidence uncovered by the FCAs Retirement Outcomes review suggests the new system is plagued with similar problems. It is a real pity lessons seem not to have been learned. Instead of buying poor-value annuities, without shopping around, unadvised customers are just buying their existing pension provider's, often-expensive, drawdown product, without shopping around."
"An astonishing 94% simply roll into the drawdown product offered by their pension provider. At least, with the new flexibilities, they will have a chance to improve their choices in future."