The TUC this week highlighted the issue of pension savers being left to fend for themselves when they retire. According to the TUC (Trade Union Congress), more than 300,000 pension savers every year are not getting proper advice and are in effect being left to fend for themselves when deciding how to invest their pension pot.
The situation has arisen thanks to pension freedoms. Pension freedoms were announced on 6 April 2015 in George Osborne's budget and was one of the most radical announcements ever to be made on UK pensions. For years, people were forced to use their pension savings as an annuity, a guaranteed income for life paid monthly. However, whilst people had a choice of which annuity they could have, in reality very few people got the best one for their personal circumstances. George Osborne's pensions freedoms however opened up what people could choose to do with their pension savings, and now people can choose to invest in shares, stocks, bonds, annuities, ISAa, bank accounts or simply spend the money. Essentially, they are free to do whatever they want with it.
"nobody who withdrew a cash lump sum from their pension got financial advice"
As good as this is in theory, without advice, it could lead to some people making poor choices and maybe not making the best use of their money.
"Pension freedom may sound great on paper. But it is not liberating to leave hundreds of thousands of people to fend for themselves in what is now a very complicated and expensive part of the pensions market. The inevitable result, if nothing changes, is a rise in scams and more older people suffering hardship."
TUC figures indicate that over 80% of people using their pension pot to buy a retirement income are not getting proper advice. The figures are startling in that whilst 73% of people buying an annuity used a financial advisor, nobody who withdrew a cash lump sum from their pension got financial advice.
The government however maintain that pension freedoms are working well and have made retirement more flexible and easier for large numbers of people.
"We want everyone to have a financially secure retirement, which is why we have introduced wide-ranging reforms to make pension saving easier and clearer," said a spokesperson for the Department for Work and Pensions (DWP).