The BBC's Panorama “Pensions Rip Offs Exposed” programme (aired Monday 11th July 2016) explored a murky part of the UK pension industry, focusing on the particular impact on Final Salary Pension holders, although it’s an area that could affect all pension savers.
An industry opened up by the new pension freedoms announced in 2015, which has changed the landscape when it comes to what we can all do with our retirement savings. As a result, the industry has inevitably opened the door to less scrupulous operators at the same time. With those greater freedoms comes an increased responsibility to tread carefully.
The BBC's investigation exposed how retirement savers are being targeted by unregulated operators enticing people to move their pension savings from appropriate and relatively low and medium risk assets into unregulated, unsuitable high risk investments.
What the show highlighted
- pensions are complicated and many people don’t really understand the mechanics of them in enough detail to protect themselves
- schemes are being intentionally misrepresented in some cases to encourage savers to transfer existing funds to assets with unrealistic promises of higher returns whilst claiming low risk
- employing some strong sales tactics to persuade customers to transfer their funds
- these operators are misguiding and arguably advising clients on huge financial decisions that are inappropriate to their personal circumstances
Whilst the show focused on final salary pension holders, the underlying lessons apply to everyone making retirement savings plans no matter what stage they are at.
What the show really exposes is the increasing need for stronger regulations as a result of the greater pension freedoms that have been introduced to protect pension savers. And this affects everyone, whether they're managing their own final salary pension fund, or starting to contribute to a workplace pension their employer has started as a result of the auto enrolment regulations.
Good planning is essential
Planning what you need for your pension arrangements is an important first step. By identifying what you need, you can make a better comparison of the available options and filter the possible providers. For employers planning their auto enrolment schemes the choices are huge (over 70 providers), but not all of them will be appropriate for you size of business.
Make informed choices
Selecting the right scheme for your personal or your business' needs is essential. From making sure you work with a reputable provider to making sure your funds are invested in appropriate assets, the impact on future financial well-being can be huge. Get it wrong and you could be paying too much for your scheme, or you could find you're invested in unexpectedly risky or hard to realise assets.
Charges and transparency
Under the guise of the new pension freedoms, the industry has perhaps inadvertently opened the door to hidden commissions and fees. Everyone taking out a pension scheme for themselves or their staff should have full visibility of all of the costs associated with operating that scheme.
Thankfully the need for greater guidance and potentially greater regulation is recognised in some echelons of Parliament, and we hope that more can be done to safeguard the financial freedom in retirement that properly planned pensions can offer us all.
Husky has commissioned a panel of experts to investigate the market on our behalf, so employers needing to set up their auto enrolment pension schemes can use Husky's free pension shortlist tool called ‘get started’ to identify which schemes are the best fit for their business.
Twitter quote @RachelReevesMP