Last year George Osborne announced major reforms to the pensions system. As a result, this week the FCA, or Financial Conduct Authority, have said they will be conducting a major review of the plans as fear of pension mis-selling rise.
The FCA has announced that it will take a close look at the changes that mean savers aged 55 plus are able to use their pension funds however they want to, which includes the new ability to withdraw a lump sum rather than being forced to buy an annuity.
The new rulings have meant many industry observers are concerned that older people could become targeted by scammers and those looking to mis-sell different types of pension plans. In our blog over the last few weeks we have highlighted multiple cases in the news where this is already happening.
The FCA review will also look at how the new rules affect the aspect of market competition and the ability to change pension providers in the current market.
A spokesperson for the FCA said:
“We will undertake work to ensure that consumers are able to make choices that are in their best interests given their circumstances. There are several risks we need to consider, for example, the risks of mis-selling and poor value for money for consumers, particularly those with small pension pots and the risk that our interventions undermine competition or stifle market development.”
The city regulator and UK watchdog will also look into the plans to limit early pension exit charges, as they are further concerns here too as this penalty can stop some savers in the UK from withdrawing their savings.
This news from the FCA was announced this week, as it emerged that around 60% of UK pensioners could be in a line for shock over the next year as they see their state pension being actually lower than the flat rate that was promised by Government ministers (£155.65).
This research was conducted by the Institute for Fiscal Studies (IFS) who “warned that 61 per cent of elderly people will receive a lower state pension income over the next four years than they do currently” – scary stuff of which you can read more about here.
With the new state pension that is coming into force on Wednesday the 7th of April 2016, the rate will be £155.65 weekly. In order to qualify for the single tier rate, UK males need have been born on or after April 6th of 1951 and for females on or after April 6th of 1953.
But it doesn’t seem to be that simple. The IFS report concluded that only one fifth of pensioners are actually going to receive the full amount. The reason being because those people “contracted out” of SERPS and the state pension where they paid reduced rates of National Insurance contributions in exchange for reduced pension entitlement.
If you were encouraged to opt or contact out of SERPS and would like to discuss whether not you are eligble for compensation please read our SERPS claims page.
With 80% of people approaching retirement over the next 4 years having been contracted out at some point then this could have a massive impact. A spokesperson for the IFS think tank said:
“There is a considerable risk of disillusionment as people start claiming pension incomes this year. It would be a shame if such disillusion was to threaten the sustainability of what is on balance a sensible reform.”
If you have concerns over mis-selling then please contact us. We work on a no win no fee basis and offer free advice over the telephone or email for anyone who gets in touch with us.