Out-Law News | 29 Aug 2017 | 4:10 pm | 1 min. read
Alastair Meeks of Pinsent Masons, the law firm behind Out-Law.com, was commenting on new survey findings indicating that consumers found pensions and other long-term financial products less trustworthy than everyday banking. Consumer group Which?, which carried out the research, told the Financial Times (registration required) that many consumers were "not getting the information they need to make good retirement income decisions".
Which? surveyed 255 people aged over 55 who had accessed their pension pots since April 2015, when tax changes allowing them more flexible access to their savings came into force. It found that many of the savers were "daunted and confused" about deciding what to do with their retirement savings, and that few consumers felt that there was much to be gained from switching providers to obtain a better deal.
Only 23% of survey respondents said that they trusted pensions, compared to 40% who said that they trusted everyday banking services and 30% who said that they trusted energy companies, according to the Financial Times.
Pensions experts at Pinsent Masons warned earlier this year that the UK's "dysfunctional, over-complicated" system of pension regulation risked discouraging both individuals and their employers from making adequate provision for retirement. In a new report, prepared jointly with information service provider Pendragon and the Pensions Institute at Cass Business School, the experts warned that "incessant tinkering" by the government and regulators was causing "immense damage" to people's pension expectations.
The Financial Conduct Authority (FCA) warned recently that savers may not be obtaining "good value" when deciding what to do with their pension pots without first taking financial advice. An interim report, published as part of its ongoing Retirement Outcomes Review (ROR), found that an increasing number of savers were opting for drawdown products over annuities, particularly those under the age of 65.
The FCA intends to investigate further whether consumers who opt for drawdown products are getting good value, bearing in mind that the trend may reflect "limited competitive pressure to offer good deals". It will take into account factors such as charging levels and the suitability of investment strategies as part of this work, which it will revisit in a final report due for publication in the first half of next year.
"People don't trust what they don't understand, especially if the consequences of their decisions won't be apparent for years or even decades," said pensions expert Alastair Meeks. "The challenge that pension providers face is making pensions easily enough understood that consumers can place their faith in them."