New inquiry will probe fraud risks around new pension freedoms

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Concerns that savers could be at risk of scams as people take up the new pension freedoms are being probed by MPs.

The Work and Pensions Committee is launching an inquiry into whether and how far the pension reforms are achieving their objectives and whether changes are needed.

It wants to know if enough is being done to prevent scams and mis-selling.

Launched in 2015, the freedoms give the over-55s a much wider range of choices over how they use their retirement savings.

But the committee said police figures show that more than £43 million of retirement savings has been lost to fraud since the policy was announced.

Frank Field
Frank Field says savers are more vulnerable than ever (PA)

The committee also said there have been recent warnings that an anti-scammer kitemark is being used fraudulently by some.

The committee said that for many people the choice of what to do with their pension savings in preparation for retirement will be the biggest financial decision they make.

But it said research suggests people are making their pension choices without the support available, increasing the risk they will not get the best value from their savings.

Of people aged 55 and over planning to retire in the next two years, just 7% used the free and impartial Pension Wise guidance service, it said.

Committee chairman Frank Field said: "Pension freedom and choice liberated savers to choose what they wanted to do with their own money.

"This was welcome, but as with any radical reform it is important to monitor its practical effects closely to ensure it is working as envisaged.

"In this case it is vital that adequate support ensures people are equipped to ensure they don't make decisions they subsequently regret.

"I am particularly concerned that savers are more vulnerable than ever to unscrupulous scam artists. This policy must not become the freedom to liberate people of their savings."

The committee is inviting written evidence by October 23.

Questions it wants to consider include:

:: What are people doing with their pension pots and are those decisions consistent with their objectives?

:: Is there adequate monitoring of the decisions being made?

:: Are people taking proportionate advice and guidance and if not, why not? Are people adjusting behaviour in response to advice and guidance?

:: Is Pension Wise working? If not, how should it be reformed?

:: Are there persistent gaps in the advice and guidance market and what might fill them?

:: Are people switching from their pension provider in accessing their pots?

:: Is an adequate annuity market being sustained?

:: Are the Government and Financial Conduct Authority taking adequate steps to prevent scamming and mis-selling?

:: Are the freedom and choice reforms part of a coherent retirement saving strategy? To what extent is it complementary to or undermined by other policies?