The pensions industry needs to wake up to the tremendous new opportunities offered by pension freedoms and auto enrolment. This is the time to show real, innovative thinking in the customer interest but sadly the industry has so far failed.
Where are the new products or default options? And why are they called ‘default options’ anyway? The word ‘default’ is hardly attractive to non-pensions people!
Customers may be taking money out of brilliant pensions products without realising the benefits they are giving up – and possibly paying unnecessary tax too.
New thinking might include, for example, a concept of ‘Lifetime Pension Accounts’ which stay invested until you really need some income or capital. These could seamlessly run from a ‘growth phase’ to an ‘income phase’ when the customer wants to, without the huge extra charges involved in drawdown. Taking money out of pensions too early is detrimental to your financial well being.
The Government’s free guidance service could also help customers understand the benefits of staying invested for longer especially if still working. So perhaps we should make PensionWise free guidance mandatory or at least the default option. Ideally people need advice but at least PensionWise can steer them away from dangerous decisions
This FCA study is another wakeup call for the pensions industry to up its game and look after customers.