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Further changes to pension legislation will cause more consumer distrust

Jade Connolly, Head of Advice at Ascot Lloyd, comments on the interim findings of the FCA’s Retirement Outcomes Review:

“Following the introduction of pension freedoms, consumers seem to be more aware of the fact that they have options when it comes to retirement. However, they still don’t receive enough information to make informed choices.

“More individuals accessing their pension below the age of 65 may sound alarming, but the key question is whether a consumer’s retirement age was 65 in the first place. While normal retirement dates on pension pots may be set to age 65, this isn’t necessarily when an individual intends to retire. Under pension freedoms, many people will take the opportunity to pay off debt and fund part-time work as they wind down for retirement.

“It is not surprising to see that individuals are withdrawing funds from their pension pots because they don’t trust pension savings. If funds are taken out unnecessarily, this could cause future detriment given that pension savings are generally exempt from inheritance tax on death.

“Some pension providers insist on basic advice before a client is allowed to access their funds, but this isn’t consistent across the industry. Making clients aware of the potential for tax on pension withdrawals along with future considerations about inheritance tax would lead to better consumer outcomes.

“It would be good to see further tools in place, consistently across the industry, to assist consumers in making better choices along with guidance on the potential consequences of their actions. A further period of change to pension legislation is only going to cause more distrust for consumers.”