Frank Field steps in where ministers fear to go on pension changes
It is welcome that this morning the Financial Times is reporting (behind a paywall) that the Work and Pensions Committee, under its new chairman Frank Field, is to scrutinise so-called pensions freedom reform.
The policy, which means savers in defined contribution pensions no longer have to buy an annuity on retirement, was rushed in in barely 12 months and has laid bare some of the disfunctionalities of the pensions system. Most notably it has revealed an array of poorly understood pension charges.
Frank Field now seems willing to step in where government ministers are not – in giving robust scrutiny to what is effectively an experiment with savers’ money.
Mr Field suggests, according to the FT, that the pensions industry “has a tendency to put its hand in the pensioner’s pocket” and has vowed to look at costs. He has indicated that the limited guidance provided to pension savers will also be srutinised.
This is certainly needed. Parts of the pensions industry have an appalling record on charges as extraordinarily slow progress on tackling legacy charges show.
And the ability of those approaching retirement to get free advice, later downgraded to limited generalised guidance, was the government’s answer to the vast array of evidence showing consumers struggle to get a good deal from financial services. However few are taking it up.
Nevertheless, it is important that any investigation of pension freedom is not limited to these areas when they are, arguably, bigger questions to be asked.
For instance, the government seems to view the exercising of pension freedoms, as measured by how many people cash-in their savings, as a mark of the policy’s success.
But a far more accurate measure would be to examine how many people are utilising the effectively to achieve what they want from their retirement savings.
And it seems that what people want in retirement is easy access to a regular predictable income that lasts as long as they live and keeps up with the cost of living.
There is little sign that the market has, so far, been able to deliver new products that meet this aim. Indeed it is unclear that the for-profit pension providers alone are capable of meeting this need without government direction.
Mr Field and his colleagues now have an opportunity to give these issues the scrutiny they deserve.